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Noob question about yield spreads


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Noob question about yield spreads

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  #1 (permalink)
Warsaw Poland
 
Platform: R-Trader
Trading: ZB, ZF, ZN
 
Posts: 15 since Nov 2015
Thanks: 4 given, 3 received

Hello,

I'm testing something on yield spreads (futures, FYT, FOB, NOB) and have some basic question.

In attachment you can find transactions list, there is ICS with price and outright prices corresponding to that ICS. If I look at ICS I can see a profit. Saying it easiest way - selling ~ -0'012 (minus 0'012) and buying back at -0'017 (minus 0'017). Even just looking at ICS FYT ladder - selling higher buying back lower. But if I count it by outrights there is loss.

How it works exactly ?

The only thing that comes to my mind is that ets ratio for this (3:2) is not accurate for short time trading.

DV01 for 5y is 46,81$, 10y 79,89$, so we have 140,43 : 159,78.

From the ATR perspective (intraday 5 min) is 5y 4 tick, 10y 4 ticks
4*3*7,8125=93,75 to 4*2*15,625=125,
so 93,75$ (5y) : 125$ (10y).

This is the reason that I can see profit on ICS ladder but in fact I can have loss ?

I will be thankful for info.

Attached Thumbnails
Noob question about yield spreads-spreads-transactions.pdf  
Attached Files
Register to download File Type: xlsx Spreads transactions.xlsx (8.2 KB, 6 views)
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  #3 (permalink)
Legendary Market Wizard
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  #4 (permalink)
Bay Area California
 
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mr Bund View Post
Hello,

I'm testing something on yield spreads (futures, FYT, FOB, NOB) and have some basic question.

In attachment you can find transactions list, there is ICS with price and outright prices corresponding to that ICS. If I look at ICS I can see a profit. Saying it easiest way - selling ~ -0'012 (minus 0'012) and buying back at -0'017 (minus 0'017). Even just looking at ICS FYT ladder - selling higher buying back lower. But if I count it by outrights there is loss.

How it works exactly ?

The only thing that comes to my mind is that ets ratio for this (3:2) is not accurate for short time trading.

DV01 for 5y is 46,81$, 10y 79,89$, so we have 140,43 : 159,78.

From the ATR perspective (intraday 5 min) is 5y 4 tick, 10y 4 ticks
4*3*7,8125=93,75 to 4*2*15,625=125,
so 93,75$ (5y) : 125$ (10y).

This is the reason that I can see profit on ICS ladder but in fact I can have loss ?

I will be thankful for info.


Are you doing this in sim? I know at least one platforms (TT) simulated matching engine gives inaccurate underlying leg fills for a simulated fill in an ICS spread. I wouldn't be surprised if other vendors have the same problem.

In live trading in FYT you will capture at least $23.4375 per tick.

.
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  #5 (permalink)
Warsaw Poland
 
Platform: R-Trader
Trading: ZB, ZF, ZN
 
Posts: 15 since Nov 2015
Thanks: 4 given, 3 received


addchild View Post
Are you doing this in sim? I know at least one platforms (TT) simulated matching engine gives inaccurate underlying leg fills for a simulated fill in an ICS spread. I wouldn't be surprised if other vendors have the same problem.

In live trading in FYT you will capture at least $23.4375 per tick.

Yes, I'm testing it on sim - and it's TT

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  #6 (permalink)
Legendary Market Wizard
Houston, TX
 
Experience: Advanced
Platform: XTrader and Cloud TT
Broker: Advantage Futures
Trading: Energy
 
Posts: 3,544 since Dec 2013
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TTs Xtrader does not include commissions in PnL calculations

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