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ES Futures Spread Trading Advantages & Disadvantages
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ES Futures Spread Trading Advantages & Disadvantages

 
Trading Apprentice
Philadelphia, PA
 
Trading Experience: Intermediate
Platform: etrade
Favorite Futures: Emini ES
 
Posts: 2 since Dec 2018
Thanks: 1 given, 0 received

ES Futures Spread Trading Advantages & Disadvantages

I currently have the following eMini Futures spread: Long ESH9 2450 & Short ESM9 2424. I plan to close the ESM9 if the market starts to go up. What are the disadvantages of holding the ES spreads overnight or for a few days?

 
 
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Market Wizard
Houston, TX
 
Trading Experience: Advanced
Platform: XTrader
Broker/Data: Advantage Futures
Favorite Futures: Energy
 
Posts: 2,643 since Dec 2013
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kakella View Post
I currently have the following eMini Futures spread: Long ESH9 2450 & Short ESM9 2424. I plan to close the ESM9 if the market starts to go up. What are the disadvantages of holding the ES spreads overnight or for a few days?

In commodity trading intra-month spreads can and do move a lot. In theory they are bounded by things like storage costs, cost of money etc, but in reality when storage is full anything can happen.

Not so with most financial futures like equities, and currencies. For these contacts the spreads are subject to arbitrage, and hence stay in very tight ranges. For equities this is dividends received minus cost of carry, for currencies it's the different in the interest rates of the two currencies. So Long ESH9 Short ESM9 has a greater exposure to interest rates than it does to the absolute level of the stock market.

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Trading Apprentice
Philadelphia, PA
 
Trading Experience: Intermediate
Platform: etrade
Favorite Futures: Emini ES
 
Posts: 2 since Dec 2018
Thanks: 1 given, 0 received

Thank you for your insightful response!

Thank you SMCJB! This is very helpful.

I would like to learn more about the types of futures spreads you put on in energy & other commodities. I am mostly interested in the shorter term (less than 2 weeks) vs the medium (more than 2 weeks) & the longer (more than a month or a quarter).

 
 
Market Wizard
Houston, TX
 
Trading Experience: Advanced
Platform: XTrader
Broker/Data: Advantage Futures
Favorite Futures: Energy
 
Posts: 2,643 since Dec 2013
Thanks: 2,128 given, 4,592 received
Forum Reputation: Legendary

There's some good threads over in the commodities section
https://futures.io/commodities-futures-trading/

Some of the most active threads are
https://futures.io/commodities-futures-trading/34295-cl-crude-oil-futures-contract-crude-analysis-thread.html
https://futures.io/commodities-futures-trading/43725-energies.html
https://futures.io/commodities-futures-trading/40925-grains-beans.html
https://futures.io/commodities-futures-trading/42532-meats.html
https://futures.io/commodities-futures-trading/42911-metals.html
https://futures.io/commodities-futures-trading/40400-softs-fundamentals.html
but there's more of a focus on outrights than spreads, at least in the latter 5.

I'm a CL & NG trade and post a lot in that CL analysis thread. I'm also a spread trader but probably not in the way most people are.
@myrrdin is very knowledgeable on commodities and very active in most of those threads.

The following 2 users say Thank You to SMCJB for this post:
 
 
Market Wizard
Linz Austria
 
Trading Experience: Advanced
Platform: Zaner360, TWS, Vantage
Broker/Data: DeCarley, IAB, RJO
Favorite Futures: Commodities
 
Posts: 1,400 since Nov 2014
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kakella View Post
Thank you SMCJB! This is very helpful.

I would like to learn more about the types of futures spreads you put on in energy & other commodities. I am mostly interested in the shorter term (less than 2 weeks) vs the medium (more than 2 weeks) & the longer (more than a month or a quarter).

Sorry - usually my time horizon is several months. It is my experience that for a small fundamental trader it is easier to make money with these trades, as we do not have all information that the big guys do have.

Spreads I trade are usually inter-commoditiy spreads, currenly RB-HO and RB-CL in the energies and KW-W in the grains.

Please feel free to ask your questions in the threads mentioned by SMCJB.

Best regards, Myrrdin

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