Registered: Mar 2008
07-20-12 06:26 PM
The best, most consistently successfull traders I knew in the pits, were almost all spread traders of some sort. Some of them were extremely sophisticated, spreading back months in the Eurodollar pit. Others were very simple, focused guys whose sytems or methods allowed them to trade pretty basic spreads like the Crush for solid money, day in and day out. It shouldn't be a suprise that a lot of these strategies have been tweaked, computerized, and taken to new levels by hedge funds, banks, and prop firms.
In my opinion, and I am only half joking, well constructed spreads, especially the less well known synthetics (correlation based, lead/lag) can be so easily profitable for chunks of time, the only problem is that you can get cocky in a hurry.
It is so smooth that a smaller, on his own, trader can get too big, too loose with risk control, and find himself caught real bad if he's not careful. Maybe that is one of the reasons even big firms have spectacular blowouts after years of consistent outperformance.