Ok, I got the TUT spread down. But let's say I am spreading just the 10-year, calendar style, front month long versus selling back month. What determines whether this spread opens or closes? Time to expiration? Volatility? Underlying movement? Any expertise and education on this particular type of spreading would be helpful.
Just so we're on the same page.......you're trading the "spread" between the December-05 versus the March-06 Ten-Year Note contracts. OK, I believe the most important factors are: (1) yield curve movements between short-term rates and the 10-year portion of the curve, (2) knowing how the (CTD) Cheapest-To-Deliver note changes with underlying movement & (3) the degree of "tightness" of the repo finance rates for the likely deliverable notes against the contract. Generally; falling interest rates, cash market squeezes, a relatively small supply of deliverable notes and a steepening yield curve tend to be bullish for the "spread". Others can chime in with their opinions. If you're going to trade the spread intensely, you've got to have access to good information in the cash market. I hope that helps.
Exactly what nazzdack said, also knowing what a few of the biggest funds are doing (Pimco, Citadel, one of the Goldman house accounts, and a few other big house accounts) and when they roll their position allows you to take a position trade in the spread ahead of their roll. For instance, Gross began rolling his long five year position late last week and throughout this week, and the spread traded from 7 to 4.5. This was also a function of the curve flattening up until FOMC minutes (and all other spreads narrowing).
As some spreads trading sites use TA charts, my newbie question is: Do you think TA is somehow useful/ helpful?.