E-mini spread trading

Discussion in 'Index Futures' started by SuperVolatility, Feb 9, 2010.

  1. I am started testing and researching E-mini spread trading mostly Es and YM.

    Based on 1 day of testing it does not seem to be working, I trades 5ES for 6 YM...spread seems to be very small...sometimes both legs negative or while there is a positive spread...market moves away fast to take fill the market oder.

    Any ES/YM traders? Will you recommend any reading?
  2. ES at 1067.50, contract worth $53,375
    YM at 10014, contract worth $50,070

    For the 6.6% difference in contract value intraday spreaders just trade 1 to 1, not 5 ES to 6 YM. For position trading it would be 15 ES to 16 YM at current prices.

    Here is a CME writeup from 2008 http://www.cmegroup.com/trading/equity-index/files/SP500_DJIA_Spreads_Final.pdf

    Spread trading of the ES/YM pair is not very viable without a clear strategy and the use of automation. You also have to compete with other traders doing the same spread.

    On a cost basis it makes little sense to do this type of spread trading without IOM and IDEM memberships.
  3. Out of curiosity, what sort of strategy do you have for this pairing? Is it that the DJIA has lower beta than the S&P, or has more weighting in industrials and less in financials?
  4. Thank you, actually I did read the CMA wright up.

    Indeed $53375/$50,070=1.06% so I was using 1:1 first...
    but (it's my thinking) with $53375X15=800,625 & 50070X16=$801,120 gives a "better?" ratio of 0.99% it's "closer" to 1:1 ... No?
  5. I don't have a clear strategy...again like I said in the post I am starting out...just playing with the it for now.

    Do you have strategy?
  6. You can download the close value for the S&P & Dow from yahoo finance into excel. Then you can multiple each index by their futures 1 point value (ES = $50 & YM = $5) to get the notional value. Once this is done, subtract the ES from the YM and generate a bar chart. You will notice that a good time to enter the spread when the value is <$2000. Take a look at atleast 10 years of data to get a good baseline.