thanks...yes, just called my broker and my platform (which I really like) does not offer spread trading as such..BUT...have been thinking about entering manual spread trades...does the margin department automatically hit the spread margin or stays at "2 daytrade margins" for 2 contracts?...or does it hit a spread margin overnight?
for me it is always considered spread margin because that is all i trade, you have to talk to your brokerage about that side of the risk management- but unless you basically only trade spreads i'm not sure how helpful they'll be with your margin req's.
can you please "walk me through" the most basic manual spread trade...either 10yr vs 30yr or 10yr vs 5yr...whatever is easiest... Example: sell 2 x 5yr contracts buy 1 x 10 yr contract or... sell 2 x 10yr contracts buy 1 x 30yr contract ...basically at the same time within seconds?
i posted the ratios before: long fit = long 15 zf, short 10 zn long nob = long 10 zn, short 6 zb long bob = long 6 zb, short 4 ub you can combine spreads if you want too: long fob = long 15 zf, short 6 zb long newb = long 10 zn, short 4 ub (my own name for this trade ) shorting any would just be the opposite- the spread is named for whether you are long/short the shorter duration of the two products you are selling (ie. in the fit it is whatever position you take in the zf) edit: and clearly you can do these in smaller ratios i just used the smallest numbers that you can hedge evenly throughout the curve, if you wanted to do smallest of each one, it's 3:2 fit, 5:3 nob, 3:2 bob)
Wow, thanks...would be pretty intense placing 15 positions on ZF etc...thanks! Will look in depth thanks!
Mother solved for 15 lots in ZF to avoid using fractional lots on the longer durations... he's not stating that you need to do 15 lots. As stated, the NOB reduces to 3:2. I would suggest you find some good introductory material on trading the yield curve.
"I would suggest you find some good introductory material on trading the yield curve." X 2 Careful there, cowboy.
x3 at my firm where we were taught basic strategies we still saw an 80%+ failure rate at trading the yield curve. so careful if you want to come play in this playground. on the flip side when you hear of the billions of dollars reaped in fixed income trading by the largest investment banks- this is exactly what they were talking about.
"fixed income trading by the largest investment banks- this is exactly what they were talking about." That is a fact. They are all monster spread traders - even when they are making markets in exotics, they are laying off the risk and collecting the spread differential. I know guys at a desk who make markets in CO2 emissions in Europe and lay it off with OTC hydrocarbon fuels like Coal Swaps. They do not like to take flat price directional risk if they can help it.
Good Primer: http://www.cmegroup.com/trading/interest-rates/files/TreasurySwap_SpreadOverview.pdf June Ratios: http://www.cmegroup.com/trading/interest-rates/files/ICS-Ratios.pdf Again, some caution - newbs can get way way over their head in a hurry here. Mistakes are expensive with futures. But I highly recommend the strategy, it is proven and consistent when properly modelled and executed.