Why isn't the NQ-ES spread tracking the percentage difference between NQ and ES? - futures io
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Why isn't the NQ-ES spread tracking the percentage difference between NQ and ES?


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Why isn't the NQ-ES spread tracking the percentage difference between NQ and ES?

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  #11 (permalink)
alphagamma
London, UK
 
 
Posts: 7 since Oct 2021
Thanks: 1 given, 1 received

I took a screenshot of tradingview with the two spreads NQ/ES (blue) and RTY/YM (orange) and the super spread (NQ/ES)/(RTY/YM) in black.



The super spread seems to track the difference between the two spreads just fine... It always touches 0% as soon as the normal spreads get back together. Please disregard the first cyan circles, as I mixed up the lines a bit...

But I understand, it's probably only good to track the differences from a theoretical point of view, once you want to build a position, you gotta pay close attention to the notional values and how they might impact these percentage calculations...

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  #12 (permalink)
JPStructure
Paris, France
 
 
Posts: 26 since Jul 2021
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alphagamma View Post
Dude, Josh!!! That's a slam dunk!

Your explanation makes it easy to understand. Don't know why I didn't think of that appraoch myself...

Dividing really yields the results that I want! Now I understand the logic behind the spread constructs with 2 tickers. What if I add 4 tickers to the equation?

For example, If I want to track the difference between NQ-ES and RTY-YM, what should I enter then? (NQ1!/ES1!)/(RTY1!/YM1!)? Is that correct?

So buying that spread (NQ1!/ES1!)/(RTY1!/YM1!) results in being long NQ-ES and being short RTY-YM?

What about 3 tickers: 2*ES-YM-NQ?

you have to be sure the Value of each tick of Spread that you are buying/ selling.
after being market neutral, you can crop the Volatility

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  #13 (permalink)
 SMCJB 
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You can't/shouldn't use percentage or ratio's with continuous contracts, where the continuous contract is constructed by splicing together absolute price series. Every time there is a rollover all your historical percentages and ratio's will change, making any form of historical back testing obsolete.

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  #14 (permalink)
JPStructure
Paris, France
 
 
Posts: 26 since Jul 2021
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to make such calculation on spreads, you will need a CQG (CQG Qtrader, is on a transactional mode


alphagamma View Post
If I want to track the difference between the NQ and the ES futures on a percentage basis, I can type in NQ and add ES on top of it to see when the two futures are far apart. Is there a synthetic futures formula that would allow me to track the spread between NQ and ES in a systematic fashion?

I tried to use NQ-ES but this leads to some confusing, at least to me, results:



As you can see, the 2 (ES orange, NQ magenta) futures and the NQ-ES spread (blue line) start out at 0% but, even though the ES and NQ drift apart and meet once again, as indicated by the green circles, the blue line (the spread), doesn't fall back to the 0% line as it should, because the gap between NQ and ES is closed at the green circled spots.

Why isn't the NQ-ES spread at 0% once NQ and ES meet and above zero (in case NQ gets stronger than ES) and below zero (in case NQ gets weaker than ES)?


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Last Updated on April 8, 2022


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