Who trades this and how do u trade it? Leg into technical levels? Then what? The exhange quoted market looks to be very illiquid. I guess my main questions are: How do you know what prices are good? What do you lean on or do with your position when you're wrong? Thanks in advance for your help!
The exchange spread doesn't do a lot of volume because it's not a retail favorite, but I wouldn't call it illiquid - it's almost always quoted inside the implied market from the underlying, and worst case you go to the underlying which is 200-500 up at all hours. Keep in mind it's a commission hog, 10 of these in and out generate 160 sides. If you don't have access to the exchange spread and/or want to keep costs down you can do a 2:1 mexican spread if you can deal with the wrong weighting and increased margin. I rarely touch these so I can't help you on technique.
Technical model based on statistical correlation analysis - in terms of how I translate that into the market the model is represented by chart-based studies. Because I have so many freakin' spreads to look at in every market sector known to mankind, I use a market scanner in an effort to 'graybox' things. Entries are mechanical and based upon model signals, with profit targets and stop/loss levels set at time of entry. I do all of my curve that way - Eurodollars, Euribor, Eurex, CBOT.
Both, depends upon the volatility characteristics for each spread. A crack spread is treated differently than a Dec11-Dec12 Eurodollar spread.
i trade a lot of NOB and all I have been doing is getting legged out in chop or getting run over on some fucking stupid move in the last month the nob has gone on tilt! really an outright ZB trade most days; the day of the new QE annoucement it moved 63 ticks from low to high more than the outright market almost! the other day the CASH nob which should lead rallied and the futures nob sold off eight ticks the next day the CASH nob rallied back up to 142 BP from 138 not that much of a move and the futures nob rallied 16 ticks makes no rhime or reason these days and when the bond algo goes on tilt you are fucked. It is better honestly to trade outright ZN or ZB on the edges the nob lulls you into safety cause its a spread but it sucks right now stay away... P.S. CBOT product chisels you on each leg no edge only good when mkt is on tilt...and you want execution out
There are so many yield curve combinations - I am always rotating around to the ones I believe to be "better behaved". Honestly, right now I like the Eurex curve and the CBOT Fly combos better than the NOB, FYT, FOB type of thing. I was one of the original beta testers for TT's AutoSpreader, and have been legging curve since the early 90's - floor and screen. USE THE EXCHANGE-SUPPORTED SPREADS. Best thing ever invented. Trades in clips of ten, so a one-lot NOB is in reality 10x6. Makes flys and condors a breeze. Love em. With the twos and threes there is legitimate tail edge in the fills. You can work a bid or offer. Orgasmic. Quit trying to leg shit in these markets.
Thanks for the insight, Bone. When you say "use the exchange supported spreads", what do you mean? Are you using TT Autospreader to create custom spreads? if so how the hell do you know what's good if there is no spread package with size? If you don't have size or paper to lean on I take it you are leaning on technical levels and the statistical correlation you referred to? Sorry for the ignorance but I am very new to this methodology and am curious. Thanks
Go to this link, where you can get the quotes for all of the CBOT implied spreads. These are executed at one price internally within the exchange order-matching engine. Best thing ever invented next to porn and beer. http://www.cmegroup.com/trading/interest-rates/intercommodity-spread.html I never have leaned on anything - I trade spreads directionally according to my models. Works swimmingly. All spreads - grains, interest rates, energy, equities, currencies, metals, interest rate curve, et al.
Bone, if you aren't trading fly's, does the NOB make a ton of sense? I am looking at these, and considering legging into the outrights for 30/10 exposure. Thoughts?