Seasonal spreads

Discussion in 'Journals' started by hrokling, Apr 23, 2007.

  1. I love the seasonality of this spread for the next few months, but I've got one, pretty major, red flag.

    Here is the seasonal stack chart for the last 15 years. The thick orange line at the top is the current spread value, the other lines represent different years. Notice how we're currently the highest the spread has been on today's date. With recent rally to .94 (today), we are within .05 of the highest this spread has ever traded at (going back15 years).

    In other words, we are basically at carry. A bear spread here is pretty high risk, low reward (It is extremely unlikely we will go below carry unless storage for BO runs low. Since it's not perishable, and with a potential shortage of soybeans next year, people will be finding room for it)

    In other words, you're bear spreading something at nearly full carry.
    #11     May 3, 2007
  2. Thank you for that, very interesting. I'll stick to the system of course, as that's the whole point of this thread, but with that backdrop it's going to be very interesting to see how this turns out over the summer. Your input is much appreciated, and anyone that can contribute to discussions around the spreads as they're being opened and closed are most welcome to do so.
    #12     May 4, 2007
  3. Oh, by all means! My commentary was an attempt to throw some fundamental arguments (one way or the other) into the mix. I don't mean them to be "you shouldn't", but rather, "here's another perspective".
    #13     May 4, 2007
  4. Entered a new trade today:

    Long 1 Dec Corn, Short 1 Sep Corn @ 1

    Could have gotten it at 1/2 or maybe even lower, but didn't really have time to work it much.

    2 new trades on May 14th or thereabouts, no position closings before then. The Oats trade into physical delivery should have been closed this week - I'll keep an eye on how that progresses at the end of the week to see where that theoretically would have ended.
    #14     May 8, 2007
  5. Does anyone look at Kanas Wheat/Chicago Corn spread these days?
    #15     May 8, 2007
  6. Are you using relative strength analysis of the contracts when deciding how to initiate?

    Looking forward to your journal! We need more of these types here.
    #16     May 8, 2007
  7. How does one initiate intermarket spreads in TWS' spread-trader?
    great to see you start this journal by the way...
    #17     May 8, 2007
  8. Bogan7: I've excluded seasonal spread patterns like that, although I'm sure there are interesting opportunities there. I think I've seen Kansas Wheat being electronically accessible, but I didn't look that seriously into it - maybe volume is an issue?

    SWScapital: Thank you - it should be an interesting journey, but hopefully also a profitable one. I've narrowed down a date for entry, as well as a timeframe for how long I can/should use for entry (and exit) - the timeframes are:
    PRECISE (on that particular day)
    3 DAYS (use 3 days)
    5 DAYS
    10 DAYS

    Multiple days would be used to enter with one spread at a time to get an average entry. However because of account size these are only 1-2. To enter, I pull up a chart to see where would be a pretty good place to enter a limit order. However, since I do expect the spreads the move in the direction I want to enter I'm not being too cheap and entering limit orders that won't be filled - so entries are perhaps not always the greatest.

    The basis for the trades themselves are statistical seasonal behaviour of the contracts, as found in the book mentioned initially.
    #18     May 8, 2007
  9. Just an update on the Oats trade which couldn't be held beyond April 25th. It should have been closed yesterday, and I don't think 3 is a bad guess as to where it could have been closed - 2 cents better than 5 where I had to close it - which would have amounted to 100 usd more.
    #19     May 10, 2007
  10. bigbiscuit: It's the Combo part of TWS, although IB are a bit picky on what they allow you to define.
    #20     May 10, 2007