So, if one were to short S&P and long dow. On most platforms they could put the symbol something like this "/es-/ym" But what if someone had a spread idea where they long both or short both instruments? What would that look like? I use ThinkOrSwim &/or TradingView
Long both what is even the "spread"? Maybe what you are charting is a custom "index"? /es + /ym doesn't work?
The answer to the question is something called an equity index futures basket. S&P/Dow >>> 50*/ES+5*/YM Nasdaq/Dow >>> 40*/NQ+15*/YM Dow/Russell >>> 10*/YM+150*/RTY You can use the same chart to buy or sell the basket. You just go to the CME site, look up the margin credit ratio, and buy or sell both with the spread ratio to trade them as an index basket. This ratio attempts to balance the exposure between the instruments. It's based on weighting the exposure so that each leg contributes to the spread/basket evenly (in dollar terms). Link https://www.cmegroup.com/clearing/margins/inters.html#pageNumber=1 (edit) Just my opinion, but the ratios on the site are not the final word on spreading these things. For example, you can spread two ES contracts against an NQ intraday. It has almost the exact same variance, but the position is better hedged.
Thanks, Curious if you know any good spreads where you long both instruments or short both instruments? Like maybe long /es & longing /ZN as a hedge? or something
2000*/UB+50*/ES is a synthetic portfolio. Since it tracks the performance of a book of stocks and bonds, it is useful. If you watch the action in this synthetic portfolio, it will tell you if money managers are going to be needing hedging instruments.....ES, NQ, UB, ZB, ZN, etc. Compare it to ES and you will see that it is very influential. A favorite of mine is a spread 1000*/UB-50*/ES. This is a rate / index spread. It tracks the movement of cash between stocks and bonds.
Thanks, I notice you use "1000" for UB. I was thinking it was a fixed 100k contract, so is that "1000" a little off? or is it an accurate reflection of the UB contract? I know 50*/ES is.
I'm not sure about the implied bond valuations on rate futures. The treasury basis is really fucking complicated. There is a conversion factor that acts on the cash value of the rate future (so the implied bond price is smaller than the cash value of the contract). We need real bond market pro's to talk about that. One way to think about it is this. If each tick is 1/32 of a point, and is worth $31.25, then each point is worth $1000. This will show in your fill price. For example CME shows that UB MAR '20 last was 187'17 which means that the contract is worth 187*32*31.25+17*31.25 = $187,531.25 It is the most volatile futures contract that I know of, in dollar terms. It's very easy to over lever the thing and be down HUGE before you even know what happened. Also, rate futures are very deliberate in their movement. They don't retrace very much at all. They trend, swing, and reverse, and do so forcefully.