closing out an exchange traded spread?

Discussion in 'Financial Futures' started by Elitist Trader, Dec 28, 2010.

  1. Just say I bought the exchange traded fly
    Is it possible to close out this position in the outrights?

    I.e. sell 1 Jun13, buy 2 sep13 and sell 1 dec13

    I know that doing this will neutralize the position, but will the positions be aggregated at the end of the day?
    To put it another way, will my broker (or maybe the exchange?) combine the outright trades with the fly and consider the position closed?
  2. by the way, Im referring to eurodollar spreads
  3. H2O


    Yes :cool:
  4. bone

    bone ET Sponsor

    Yes. Careful about the legging risk/slippage - IMO it is almost always better to stay with the exchange supported spread if it is available and work a bid or offer if you want to capture a bit more. Turning spread risk into outright risk doesn't make much sense, and in fact defeats the purpose of using the strategy to begin with.
  5. So when and who combines the positions together?
  6. bone

    bone ET Sponsor

    If you are trading an exchange-supported spread, the exchange legs the spread automatically for you with their internal order-matching engine; what the trader sees is one price DOM ladder but the execution fill window displays two leg fills - one buy and one sell with a quantity and price tag.

    Of course with non-exchange supported spreads, they are filled either manually by the trader or with automated spread execution software (AutoSpreader). I actually have some of my clients practice legging spreads manually using the SIM markets before they go live. I always warn traders about the dangers of getting too 'cute' with the legs - depending upon the volatility of the particular market it can be very difficult; when I do it personally I usually try to split the difference, that is, if I get an edge on one side I go to market on the balance leg. Even when you are using automated software to do the job, the market essentially has to trade through you in order to get the fill.
  7. Thanks bone.

    Turned out my trades weren't cancelling each other out due to my trading platform (CTS futures). When I want this done, all I have to do is call my broker and they take care of it.

    Splitting the difference does seem like the way to go and I think one should really use an auto spreader to help pickup any stale contracts at a good price.

    Just on waiting on the market to trade through you to get filled, you might want to look at the exchange trade matching algos for the product your trading. Most STIRs use a pro-rata trade matching algo (instead of the normal FIFO) so if you have the money, you can put up say 500clips to get 100 filled.
  8. Only pussies trade spreads. :]
  9. bone

    bone ET Sponsor

    I know all about the pro-rata, I quit trading Euribor when they moved from FIFO to Pro-Rata - why should I make markets for Liffe and show size when it becomes a silly quote stuffing game? When I quit trading Liffe, it was first 200 FIFO before Pro-Rata kicked in (I used to spread Euribor against Shatz and Bobl before Liffe killed the Euribor).

    The point I made about AutoSpreader is the same for CQG IC or anybody else's spread legging software - you are not going to pick up a bid/ask spread, just a nature of the beast. I am trading for divergence, and I am using the exchange supported spreads whenever and wherever available. I usually just work a bid or offer in those and leave it at that, since I am almost always scale buying or scale selling to build a position.
  10. bone

    bone ET Sponsor

    Proximo, the bottom line is in fact the bottom line. It is all about the money. I can make X dollars scalping for 60 tics, or I can make that same X dollars leveraging a spread position for 6 tics. I can promise you that that spread will model and trade much smoother than that outright flat price market - undeniable fact. Compare any legit consolidated price differential spread chart to the outright flat price leg chart.
    #10     Dec 29, 2010