Seasonal spreads

I don't think they have a definite account size, thus you cannot really blow up. However, in the real world money management and position sizing is key.

 

I had a limit order in the Nov07/Feb08 RBOB spread which got filled on Friday at -0.0150. The first contract was exited at -0.0200, so the avg of the two is -0.0175. So for the record:

Sold 2 Nov 07, Bought 2 Feb 08 RB RBOB Gasoline @ -0.0175 - CLOSED - PROFIT of 0.0055 or 462 usd.

This spread together with the Oct07/Feb08 spread had some decent profit potential, but an entry that could have been better and not taking the windfall profits Friday a week ago makes me happy that between them the loss was only about 300 usd.

 

I believe it is also a strong argument for using more than one methodology. If you allocate your funds among trading 3 reasonably profitable systems, and one blows up, then the theory is that you are still 2/3s in the game. For seasonal only traders, one could also use the nonspread seasonals. There is also some who follow seasonality of stocks (IBS, Motorola) Etc. etc.

 

Absolutely - having several non-correlated systems is much safer and keeps you in the game when you have a drawdown in one of your systems.

 

A little while ago I closed the two ZB Dec7/ZF Dec7 spreads I entered on 8/12 at a total profit of $1,720. This is the spread SupremeTrader thought should be entered the opposite way. Even though the spread has been going nicely in my direction I decided to exit it because I think the 30 year bond might suffer because of further interest reductions by the Fed and the resulting inflation fear for the far out maturities. I will be looking to add more Eurodollar and Note spreads.

 

Hi Kahai:

The copy below is our gist on page 29 of hrokling’s thread. I told you to flip your position if the spread is reversing. I was trying to tell you that you can trade the opposite direction also and not in just one direction. I did not tell you to take the opposite direction. You can reread our gist below or go back to page 29 of the thread and get the same info. Here are my exact statements.

“Furthermore, I just cross-checked the returns on ZBZ7-ZBN7 and ZBZ7-ZFZ7 Spreads. They are very similar but the former is slightly more profitable. Hence, it makes no difference which one you choose.”

“Do not be entrapped by past records. They are simply guides. If you are intent on trading the ZNZ7-ZFZ7 Spread, then watch out for a reversal and then flip your spread to ZFZ7-ZNZ7. Don't trade in only one direction. Just follow the price.”

You were already trading ZNZ7-ZFZ7, which you preferred over the NOB spread. Hence, my telling you that if your preference is for the Notes only spread, you can also make money by flipping your position to ZFZ7-ZNZ7, when the spread reverses. I also stated that ZBZ7 – ZNZ7 is very similar to ZBZ7 – ZFZ7. I never told you anywhere on this thread to take the “opposite way” of ZBZ7 – ZFZ7. I hope this makes it more explicit.

I’m glad you made a good profit. Trade reversal is also very profitable, if you have a good trading signal. Professional traders do it all the time. I was just passing this reversal methodology through you to all the Forum Members on this thread who may not be aware of it. Most Spread Traders trade in only one direction.

Best of luck.
PS: ZBZ7 – ZNZ7 was erroneously labeled as ZBZ7 – ZBN7.

 

SupremeTrader,
Thanks for the clarification, we are all in a learning process.

I got a PM inquiry regarding what I think about the Lean Hogs spread Dec07/Jun08 from the Encyclopedia. Since this is a general question I would prefer to have such questions posted on the thread.

Since I did not purchase the Encyclopedia yet I can't answer this, hrokling probably could give you a better opinion. I am looking at Feb08/Dec07 spread for a possible entry if it declines further, however, some people advise against entering any meat spreads electronically because they are so thinly traded.

 

I'm unable to find a Dec/Jun Lean Hog spread in MRCIs Encyclopedia - there is a Dec/Jun Live Cattle coming up around now.

I don't have any strategies in meats in my gameplan, although I'm right now in the Oct/Feb08 LE spread from -3.4 and also traded the Oct/Apr08 HE spread in mid-July - I just don't post these things in the thread as I'm only tracking my pre-planned trades here.

I think Meats offers some good opportinities, but that it's only Lean Hogs and Live Cattle that seem to be possible to work electronically. If you enter your electronic limit order at the "right" place compared to where the spread is trading, you will get filled - I guess you get arbitraged from the pit once there's 0.1-0.3 difference. However, the order book of the spread can be completely out of whack - you have to know where you want to enter - no free lunches. In July I think the market in the spread was something like -4.5 to -1.5, and I bid at around -3.7 or something which was proper. Sure enough, I got my fill within one day I seem to recall.

 

Entered a new NG spread yesterday:

Long 1 Nov NG, Short 1 Oct NG Natural Gas @ 0.970

Unfortunately, this spread jumped more than 0.200 just in the last week or so - making the entry not that good. I actually forgot all about this spread and discovered it today as it was to be put on - usually I try to start tracking a spread earlier than my planned entry just to avoid this from happening.

I'm only taking on one contract because of this, and feeling conservative about it. If it drops under 0.900 I'll probably add a contract.

 

I am in the same spread, it was supposed to have been entered on 7/10 - luckily I did not take it then because it got stopped out on 8/10 at a loss of $1450, that's when I entered it at .788. According to the chart it has the potential to go to 1.3 but we have to be careful not to miss the exit on 9/11 (ominous date) because after that it falls off like a cliff.