sorry I cant give a very indepth description but all i do is look at the various months going along the yield curve and find a spread that is moving in a trend and has appropriate amount of risk. you will find that the futher back you go, the more risk you will have to assume a z4-z5 spread will have more risk than say the h5-m5 im tring to get in just as a new trend is emerging. other than that, i just hold on until it looks like the trend is over. this is something i dabble in rather than use as a main source of income. sometimes the returns can be huge, smetimes a small loss - just like trading anything else. hth - if anyone knows better - im all ears.
a lot of people are moving into the intra-day spread trading arena. trading the calendars (and some flys) back and forth for a few ticks, not as profitable (or as risky) as trend-following though.
this is true - more common in europe in the prop houses on their contracts like german bobl etc technology setup and very low costs are key to this type of trading. ok if youre in a prop house - not if youre at home.
As Fred rightly points out, eurodollar futures volatility varies with time to expiration. Volatility is highest for contracts 1-2 years from expiration (White4 - Red4). From around 3 years onwards, the vol term structure is quite flat. As the front contract of a spread draws closer (typically <9mths), that diminishing vol makes the spread increasingly directional. For example, a U4-U5 spread trade now would be little different from an outright U5 trade. Some choose to trade a directional view this way to catch a small cut in the margin. Spread pros used standard deviations, means and normalisation to trade the range, but usually with a view about the Fed built in as well. Globex, while making it easier and cost-effective to trade the spreads, has attracted other players, and I sense that the behaviour of the quarterly spreads out to Dec5 is beginning to reflect that. We've seen it in other markets, and the liquidity and depth in the EDs must be attractive to the auto traders.
Is anyone here trading Eurodollar on a short intra-day basis, like you could say say FITE or Bobl/Bund? Any reference points around? Also, any of you guys looking at it on Liffe or just CME. I trade from prop shop, so thinking of trying it out. Help appreciated. Cheers,
I have traded that style in recent weeks - but trading around existing futures/options spreads rather than a core strategy. That was H5, just picking up a few ticks at the open or the close, probably not enough juice for your game. The props would probably focus on M5 or U5. I can put you in touch with an experienced ED former pit trader who scalps these from upstairs in CME these days - PM me if you're interested.
I've been trading merger spreads in the equities for the last five years. Just recently found out about the GE calendar spreads and am looking at m5-u5 for intraday spreading and legging. Seems like a great product, I'm just a little apprehensive since both contracts trade electronically and that generally makes the spreading game pretty tough. Similar in my book to trading two nasdaq stocks in a merger, almost no game there at all. Anyway, I talked to a floor broker today and those are the contracts he suggested I look at. Just passing on info and am up for any idea exchanges you guys have.
It would be nice to understand why those two contracts amongst all. BTW, CME Time and Sales report no spread trades.
a good platform makes e-spreads a lot easier TT's auto spreader being a good example. not enough liquidity in liffe ed contract for intraday stuff - but their connect matching engine is superior to cme i-eagle or what ever its called.
As I originally said, I trade ED intraday and I don't do spreads, I take outright positions in the the first few months up to SEP05...there is increasing volume and volatility of late and this makes for an intraday traders dream...I look for very short term momentum plays ie: breakouts, figure related movements etc...I used to trade Euribor but ever since ECB has stopped moving rates it is pretty terrible from a volatilitly standpoint...so I switched to Eurodollar...I trade it exclusively on CME, but Liffe has a good platform, but nowhere near the volume.