Crude Calendar Spread Question

Discussion in 'Commodity Futures' started by bathrobe, Mar 30, 2012.

  1. bathrobe


    Hi, I am new to spreading and I have some questions that are probably basic but here goes.

    1. On the screenshot below May-June CL Calendar Spread while I was watching the price on the two separate contracts went from a spread of as much as -60cents to -45 cents but the dom for the spread only went from -54 to -53.

    2. The depth of the individual contracts is light but the depth of the spread is heavy, I could capture the difference easier by legging in I think (if I get filled). Do exchange supported spreads trade on their own market?

    I am confused

    Thanks in advance.
  2. drm7


    Someone like Bone could probably give you a more complete answer, but I also looked at this phenomenon with dreams of riches, lol.

    Exchange-traded spreads are tradable with the right platform/broker. There are some threads somewhere on this forum which address this. (Or ask Bone.)

    Legging into a spread with two thin contracts will eventually get you run over if you get filled on one side and the other runs away from you.
  3. bathrobe


    Yeah, when you chart it mean reversion on this looks quite exciting
  4. drm7


    I would add that just looking at a chart of one contract minus the other is not helpful. That is the LAST minus the LAST. One contract could have traded 5 mins ago, and the other 5 secs.

    You need to look at the DOM, like in your screenshot.
  5. Moves like this based on a live bid/ask of each leg would not happen. If the spread is -54/-53 and the spread is offered -55 on legs then it would be arb'd immediately.

    Moving 5-7 cents beyond the exchange supported spread does not happen.
  6. bathrobe


  7. bone

    bone ET Sponsor

    So, the Initial Margin Requirement to carry a May - June 12 Calendar Spread overnight is $945. You get the margin credit whether you legged into them manually or you simply bought or sold the exchange supported spread. For day trading purposes, most Chicago FCM risk managers will assign spread traders 4 to 1 buying power, and the overnight SPAN margins are automatic and assigned by the exchange clearing house.

    Once you get past the latency in the last price prints, you realize that there is no free money in legging into a spread versus using the exchange supported spread.





    945 USD

    700 USD
  8. Tom36


    hi, bathrobe if you have some questions about spreads we can talk via email or pm. I have registered to repley to your post but can not send any private messages. I am spread trader for a prop company. Also I am curious what platform are you using, and what are the fixed costs, and costs of trades. Thanks