Important note: There is no book on this. You have to suck it out of someones ass. I had to figure this out by myself because higher-ups never wanted me to learn about this. Now, the co-efficient will not change every single day. And if it does, it is so small. There is only a real change when you notice that the Bonds have moved quite a bit off some fundamental data. Play around with tiny changes in the co-efficient to see yourself. I check them once every few weeks to every month. They don't change and you don't need to be scared of them shifting. You want your edge to be so refined that a few ticks here and there, or slippage, isn't enough to take you down. This is my mentality. Regarding Shorter Term Spreads IB v Bank Bill - Can suck my ass. Eurodollar v Bank Bill (do you mean Australia?) - A great trade if you know what you're doing. Do you know how to plot out the Australian curve and look at different bellies of it? Also, are you willing to hold through various Tier 1 announcements? I am developing this as part of my trades, but it's going to take some time because you need to grab a juicy contract. You can't just be throwing money in the 8th Eurodollar when the 8th Aussie Bill doesn't do much volume for fills at night time for example. To be honest, stay away from this trash for now. Let spastics like me waste time on this. I've given you other things which move based on research. It's very hard for you to go back in time and pound informational research on cross-country Billspreads because of so many moving variables. Spend your time wisely. Bank Bill vs. Aussie 3yr - Can suck my ass. You are trading a 1bp spread on HTS to a 1bp spread to a Bank Bill. The ASX needs to reprice these stupid clunky things for you to get some more movement. For now, if you trade this, it is an absolute requirement that; a. You know what the short-end Bills are doing (mainly the first 4) b. You know your time-frame (multiple days) c. You don't fade this based off 'predicted volatility' d. You know that Australia's interest rate slump will keep slumping for a f*cking long time. People are in the middle of losing their careers right now because they are praying for the interest rate cycle to turn. U.S. CPI just came out a few hours ago and it's weak, they removed the 4th rate hike price-in for 2017. This is bad, bad news for inflation world-wide and especially Australia. By the way all products I mentioned are viable, of course, but what are you approaching the trade with and how long is your time-frame? If you're day-trading, forget it. I want volatility to go up like everyone else, but if I keep fighting the facts then I will be bankrupt. The hardest part of the Australian short-end is that they are open 23-hours a day for trading, which means there is never a panic to get something done. This is the nail in the coffin during a slow interest rate market. For comparison; the BXA (Canada bills) do 180k volume a day, just like the Aussie Bills. But Canada is only open for half of the time, and during American timezone too! You can guess which has more activity... and they're both pretty ASS. About the co-efficient pricing: You don't need to be specific. The (1/10) is the same placing as (0.096). It's just a rough aproximation. The [1] and the [10] are explained. About your charting: It's in-correct because you have to respect how CQG prices the product. The HXS moves in "1 basis point increments" but it's QUOTED in half-ticks. This means it's 1*HXS-0.096*CB You have to check how the pricing mechanism is formed for the product first. For example, the S&P500 moves in "singular points" but its QUOTED in quarter-ticks. If I want to chart SPI-MINI full ratio, I will do AP-2.4*EP which means for every Mini's POINT (4 quarter ticks) moved, I'll get 2.4 spi ticks out of it. Remember if I charted the HXS-(1/10)*CB it means that for every 1-tick increment in the Canadian Bond, the HXS will move 1/10th of its increment... of FULL-POINT pricing... so if the CB moves 10-ticks we will move (1/10th) * 10 = 1 basis Point. Here's a picture of the Canadian Bond ladder. It's a "runner" just like the Bund, Gilt etc. This is confusing, I know. In fact, I traded so many spreads over the years not knowing how to truly understand them. I know these spreads better than a hooker knows her vag. Unfortunately, there's no guidance anywhere and everyone's a secretive scum f@ggot so I don't blame you. A trick on CQG and how to check if your charting is near correct: What I would do is use the yield function to roughly check my pricing. Now, the yielding is wrong because CQG use some sort of price information somewhere, but what I would do is (for example): If I wanted to test the yield chart of HXS v CB then you chart the following: YIELD(CB)-YIELD(HXS) Yes, that's the correct quoting form. It puts HXS in-front. If you chart this you get: Now when I tested your chart calculation (Price = HXS-0.2*CB) I get this bum fuk: But when I chart my one, I get: Sometimes, I will play around with the yield function just to triple-check I am on the right path. How to think about Spreads and charts: ===== sommi's cheat sheet: Note: Charting Only. Do not bring currency into this. Do not bring tick VALUE into this. Do not bring dollars into this. We just want to refine the price quote in the same language. Australia Bonds (HTS, HXS) = Quoted in basis point pricing just like Bills HXS-(1/dv01)*Product The Bund current DV01 FRSK on Bloomberg is (139). What is the Aussie 10yr to Bund chart? HXS-(1/13.9)*DB Why? The FRSK tells you the Dollar value made (divide 139 by 10 euros a tick) The Canada 10yr is 104. What is the chart for this? HXS-(1/10.4)*CB Runner Bonds (Bund, Gilt, Canada etc.) = Runner-(DV01.Runner/DV01.Follower)*Follower STIRS (HBS, BXA, QEA, EDA, QSA) = Yield for Yield, no quoting change needed or currency manipulation. Example: Australia 8th bill to Eurodollar 8th bill = HBS?8-EDA?8 ==== Ratio calculation Theoretical experiment; if I made 1 basis point in Leg A but got bum-fuckt in Leg B, what is going to make me be exactly neutral? Step #1 Find out what a basis point movement is, in ticks Step #2 Find out what you made or lost based on the currency Step 3# Make one of the currencies into the other Step 4# Equate them and think "Alright, what's going to make my ratio perfectly matched?" ==== Australia and Canada Step #1 If the HXS moves 2 ticks, it's 1 bp. If the Canadian Bond moves 10.4 ticks, it's a basis point. Step #2 HXS = 2 ticks = 2 x $50/1-lot = $100 Aussie Step #3 CB = 10.4 ticks = 10.4 x $10.C/1-lot = $104 Canadian $104 Canadian is about $103 Aussie (Convert using the currency) Step #4 Alright.. I lost $103 but I made $104 on my Canadian... so I know if I had a 1-lot in the Aussie I'm okay with the 1-lot in Canadian. In another world, if I made $100 in my Aussie leg but lost $200 in my Canadian leg, I would need 2 Aussie's to 1 Canadian as a ratio Final Note This is a toolbox for whipping out a spread. The most important part is your research and informational edge.
There use to be tons of guys like Sommi. But many were driven away by negative creeps Rather than being negative, why not learn from his success and be happy a few experienced guys guys With an effective method are still willing to teach
I've been trading for a couple of months but I have only traded Australian bills so I was thinking of trying to spread bills with something but if it's not worth the effort then I can work on something else. Can you recommend any other products to start with during the Asian or European sessions? I was hoping to keep one Aussie leg just because that's what I've got experience trading. What do you mean by bellies? I haven't been able to find much material on trading STIRs so I've been trying to work it out by myself.
The Australian session is known to be a graveyard of spastics and tap-and scratchers. The RBA isn't changing rates for a long time as well. Asian session: Australia and America European session: German, Australian, American, British Australia does not have a close link with the Bund or Gilt as it does the U.S. Btw, Belly refers to the stomach of a yield curve. If I talk about "getting raped in the belly of the curve" it means someone is trading two far points of the yield curve and experiencing some pumping in the middle as it diverges. Also there is no information on trading STIRS except that ancient book which is irrelevant now. No-one will donate their edge away because they're weak cuckolds. I don't have fear. If you wanted to start with something basic on STIRS you probably would do some basic simple moving averages on 15 or 30-minute charts of the BXA (Canada bills) to HBS (Aussie bills) to EDA (Eurodollar, USA Bills) Otherwise, if you want to just do "STIRS" you're going to need every single outright ladder up (All 8), and their 3-month calendars, and the 6-month calendars, and you need to be clicking around all day like a muppet and queue-holding orders, trying to squeeze in somewhere and ride behind an order. The Aussies open 23-hrs a day for trading so this is bad news. You're much better off doing the Sterling (QSA) but you will have a delay. Also it all comes down to how you want to trade. Nothing will be produced without research first. The basic one is just the Aussie v USA 10yr spread since Aussie rates aren't moving anywhere for now.
Hey Sommi I have just read through a couple of your threads and felt the need to sign up and thank you. You're obviously a veteran of the game and seem very transparent compared to most. I have just started the training with a Aussie prop shop as I've become obsessed it's trading ever since I discovered it approx. 12 months ago. From reading some of your posts it's rather clear how you feel about the current market conditions and how difficult it is for a newbie, yet I'm still going to have a crack. Any advice? As you would know, we are being groomed into the Aussie market only, getting flys on the bills and learning to read the 3/10 curve. The traders were honest with us and said out of a class of 14, only one will make it past a year and that's if they are lucky.
Look man, I'm going to be honest with you; any advice I could give to you now would be wishy-washy generic advice that secretive scum 'false prophets' try to give. If you want to win at this game, you need to start reading through my historical posts. Go to my post history and read through. If you are serious about winning, you will do this. I give away juice. And by 'juice' I mean, I show you how to fish for trades for yourself (or give you a head start). Also, trading short-end Australian products in a zero-interest rate environment (when the RBA isn't going to move for a year) is basically suicide. You have a lot to go through for now to keep you busy.
Hey man great thread. How's everything been going recently? Are there any spreads you recommend during these times? Is AU/US 10:10 worth looking at during the Asian session?
There's no secret products to do. AUS/US 10v10 or AUS 3v10 or AUS Bills-v-3yrs or just simply Bills There's a reason why 95% of my trades appear from 4pm to 3am (European Open to about 1-2 hours after) for 5 years now If anyone honestly wants to stick around only for Asia session market then you are not taking your career seriously and as such, your results will speak for themselves. The London time zone is the bare minimum. The failure rate is already 97%, I think with Asia session players its more like 99.99% and the only people who trade it now, actually have extremely poor risk-adjusted returns, so they're a function of their size and brokerage rebates (which they built during 'easier' times 2012-2015).