Futures spread trading

Katsanos has some stuff on seasonals

http://www.mkatsanos.com/SEASONALS.html

Calculating correlations

http://www.activetradermag.com/assets/news/story_excerpts/May09/katsanos0509.pdf

A few other nice things on this site,

 

I don't do technicals myself.

 

Nor do I...I watch almost every tick everyday...so I am a cross between a fundamentalist and a tape reader.

My number one rule is to never break the spread up...never ever...I just don't. It went on as a single idea. Right or wrong that's the way it's coming off.

 

Does re-centring ladders count?

 

I actually have no idea what this means, to be honest. A "ladder" is smth else to me entirely.

 

Ah -- meaning in the context of a TT screen, with the spread movement seen as component price ladder movements.

 

This has been a surprisingly civil thread so far...

I have long been meaning to increase my knowledge with regard to spread trading. Would any of you care to recommend some literature?

 

My preference is for the manual global re-center.

The Eurodollar spread ladders never need to be re-centered during the course of a typical day.

The Crack Spread ladders need to be re-centered every 30 seconds.

Gold vs. Silver: every 30 seconds.

LME Lead vs. Zinc: once per day.

ES vs. Comex Copper: every five minutes.

Bobl vs. U6 Euribor: twice per day maybe.

 

From Crain's Chicago Business:

CHICAGO, IL --- December 14, 2009 --- HTG Capital Partners, a 100-person trading firm based in Chicago, acquired Kingstree Trading Group, which at one time accounted for 25% of stock-index futures trading at the Chicago Mercantile Exchange.
The acquisition by HTG highlights a seismic shift taking place in the Chicago trading world, as large firms absorb smaller ones in a technological arms race that rewards those with the fastest trading systems. Kingstree’s traders, once numbering as many as 60, were the earliest traders of CME’s electronic S&P 500 index futures and helped make them into the market’s most active stock-index-based contracts. “Kingstree was one of the early movers in shaping today’s proprietary trading business, and this merger adds a highly talented group of traders and managers to the HTG organization,” HTG CEO William McNeill said in a statement.

In recent years Kingstree’s business has dwindled, eclipsed by bigger firms with ever more sophisticated computer-driven trading styles. Mr. McElveen’s decision to sell the bulk of his firm’s business to a bigger firm reflects that new reality. Financial terms weren’t disclosed. Eighteen traders and three administrative staff will shift to HTG as part of the deal.

HTG Capital Partners has operations in exchange-traded and OTC financial instruments. HTG specializes in spread trading strategies in products including futures, options, currencies and cash bonds.

 

Greatly appreciate the insights from the pros contributing to this thread. Also respect the proprietary nature of detailed solutions. Of course, dialogue on this topic can continue with regard to general concepts, with the last mile of a solution to be realized between the ears of the aspiring spread trader.

To stimulate more discussion on modelling spreads, I will mention a key distinction between spreads and outrights. Spreads can be decomposed into 2+ legs, with each leg modelled separately and then compared to draw conclusions about how the spread may expand or contract. This approach is (almost) similar to how indexes can be analyzed by studying their components (e.g., market internals).

Comments welcome.