Spread Question

Discussion in 'Strategy Development' started by SITH, Jun 23, 2005.

  1. SITH


    I am in the early stages of studying intermarket spreading, and I have run into some questions.
    Here's a question concerning spread pricing; use NQ-ES as an example. Let's assume a ratio of 3NQ to 2ES. The following legs are executed

    -3 NQ 1543.50
    +2 ES 1216.75

    Position is short this spread with a net credit of 2197.

    At different times while the position is open, the value of the spread rises above 2200, yet the net equity of the positions also rises. How is this possible? What am I missing?
    Also, can anyone suggest and books or resources on this subject. I haven't been able to find much that is very helpful. The best resource has been this forum.
    Thanks in advance.
  2. SITH


  3. SITH


    I'll assume that you didn't read the post and I'm sure you didn't read the link you sent.
    In any event, I'm not looking for info on seasonal spreads, nor am I looking for a subscription to a newsletter. I'm looking for info on the mechanics and construction of a spread.
  4. You're not even close to delta neutral here. I'd call this a ratio spread. Ratio spreads work differently than regular spreads. Sorry, I can't direct you to the right resources, but just knowing that much gets you a little closer.
  5. Sith,
    There are several books on spreads. He (Edo) gave you a link to a site that sells such books. The tersety of answers to your question is due to ET's general ignorance in this subject, do not be too put off by this. Your broker "marks you to market" on the position each day and calculates your net position (equity).
  6. Ebo


    I deleted it for you.
    Read one of those books and you will be profitable.
    Since you are too cheap to pay $150 for an education, I doubt that will occur.
  7. When trying to calculate a spread always use the total contract value(s) in conjunction with the net differences of each component of the spread. Then simple arithmetic
  8. SITH


    DR Oil and Reardon-
    Thanks for the helpful replies-

    If you think that typing two words into a Google search is being helpful, you're mistaken- it is not. In the future, do this forum a favor; ignore all serious, posts, and stick to what you're good at.

    Quote from Ebo:
    Pass 'dat bong Hydro!

    This is your best chance at any meaningful contribution here.
  9. Ebo


    I have three letters for you.

    L M B.
  10. SITH


    Way to go-
    I knew you wouldn't disappoint.
    #10     Jun 23, 2005