After a discussion on another thread about scalping tics, I wondered if anyone could help. Im interested in the technique of taking a tic out of STIR's spread . I wondered if anyone could be really cool and describe the method of trade selection and entry. Are there relationships u look 4 in the outrights, or do you enter on gut - sit on the bids and then put them again out on the next tic? Sorry if this has been discussed b4. I have searched threads but find nothing. Do post a url if it has been worked over b4. Any help would be appreciated and also show everyone u know your onions and r an ELITE TRADER SUPREEEEMO!
Perhaps more information can be found on the US products (TBonds / TNotes / TBills) or the BUND / BOBL spread. Principle is the same.
What kind of spread trading do you mean, intramarket-spread or intermarket-spread? What products do you find most interesting?
Hello there, I used to scalp spreads in the STIRS and had written a piece about how to scalp when the STIRS first went screen based. Its basically about how to look at spreads as probabilities, and how to understand the 'implied spread' and use that as a basis to scalp. It was written maybe 3/4 years ago and since then the implied spreads are not quite so relevant except when you get further down the curve. Its a bit lengthy to post here, but i can mail it too you if you would like to look at it? Below are the common sence rules that may help. Experience of spread trading has allowed us to identify some of the basic mistakes that are made by traders attempting to leg spreads. If you bear the following in mind your profitability will improve and you will learn how spread trading can offer a lower risk form of trading. 1. When lifting a leg either to get in or out of a spread, do not do it to your maximum position limit. When you leg a spread, that is when you are exposing yourself to risk, so it is unwise to do it with a big position. If you trade spreads in 100 lots, leg out in say 30 lot clips, or what you deem appropriate. That way if the leg does not come off, you have not lost all your potential profit, and if you do take a loss, it will obviously be smaller. 2. If you have legged one side of a spread to get it on, consider getting the spread in the order book before you get the other side. Often the spread will trade at the same time as you getting the second leg, and that way you haven't then got to wait for the spread to trade to get out of the position 3. If you have a spread on and you do not believe it will trade in the order book you will have to leg out to get your profit. Try to cover the losing leg of the spread first. Often getting out of the profit leg will leave you with a scratch on your hands. 4. Leg your spreads in the direction the market is moving. If the bond markets were rallying, it would be unwise to get the short side of your spread on first, logic dictates that it would be more probable that the bids would be trading. 5. Trade the spread from the way the market is moving also. If the long end were selling off you would expect spreads to narrow, so trade the spread from the short side. 6. Be prepared to build up your position. If a situation arises like the example in these pages, you may as well try and get as many spreads on as possible, while still bearing in mind rule 1. 7. The spread can often also be used as your stop for an outright trade. For instance in the previous example, suppose there was a lot more size on the June offer. Then you want to be a big outright seller of Sep at 93.33 even though there is only a small offer at 93.34, why? Well because at worst you can then lift June to be long the spread at 24 and if this is value, you will have a scratch trade. 8. Be flexible and look for other options. If you are long the Jun/Sep spread and it looks like a scratch, can you get some longs on in Dec, to roll the spread down the curve and get short the Sep/Dec spread instead. With spread trading you have many options at your disposal consider them all. All the best TsunTzu.
TsunTzu - Thanks - I have sent you a pm regarding the document you wrote. Your points are very interesting. UBSResearch - both! Any interest rate product is a potential here.