Intraday Pair Trading

Hi guys,

feedback on intraday pair trading ETFs? On an intraday basis do pairs get out of wack enough to profit when they rebalance? For example, SPY/SH, or even SPY/QQQQ/DIA. Is it better to do it overnight?

Charts say its feasible, would like to hear from someone doing it/tried it.

Thanks

 

I have done a little trading with DIA-SPY, IWM-SPY and DIA-IWM and always and only intraday as opposed to equity pairs, which i may hold for months. it seems as if IWM-SPY would have worked well over the long term holding overnights (for weeks or months) but to me, trends of what is in favor, be it tech (for your QQQQ play) or small cap over large cap, etc. gives rise to trending behaviors that go on for months at a time and the way i trade pairs, i am looking for a fairly quick mean reversion/reliable cointegration in a tight differential range.
Intraday, with a ratio of 1.75:1, IWM-SPY's spread will move about 60 cents per day on average right now so as the spread is down about 90 cents, it may be a good time to buy IWM and short SPY, after which, you can either add another "layer" if it goes further out or have a set stop in mind.
these pairs have worked OK for me, not as reliable as other equity pairs, but OK and the liquidity is more than enough for my purposes.
good luck

 

Thanks for your reply Colonel.

 

IWM-SPY was a good trade, spread really started to narrow around 1:30.

 

Are there any prop firms besides Bright that allow/focus on intraday pairs? Apparently the only way to do this is with leverage, for substantial gain (or loss), anyway.

 

thanks man, i stumble upon a good trade every now and then, with a great chasm in between the "now" and "then"
anyway, got my 35 cents out of it, hope you got the max. 55 cents.
i think Echo is also good for pairs and perhaps Avatar, as it says on their website.
even retail, IB has their portfolio margin account where you can get up to 6x leverage on some hedged portfolios.
good luck

 

Try 2 contracts of ES vs. 3 contracts of NQ. Long one and short the other - IB's margin is $2827 for all 5 contracts. $24 in commission to get in and out. Range this month over $2500. I have see day range upto $800, but that's not how I play it

 

Yeah I talked to another guy about the ES/NQ spread reversion, seems like a good trade at times. On the other side, is there a way to play the ES/NQ spread expansion (divergence) in options? Like a ratioed short NQ butterfly / long ES butterfly?