I'll just comment on this. Since some nice spreads are not exchange supported, you will have to leg them. Examples ES/NKD NQ/YM YM/RTY NQ/ES In general, if you want to trade index spreads or spread rate futures against indexes then you will be legging the spreads. This is one of the reasons that you will need a large account. This is also why it is generally considered a professional style of trading.
Two Year Notes versus Eurodollars, Short Sterling versus Euribor, Gold versus Silver, Kansas City versus Chicago Wheat, the Cattle Feeding Spread, etc. etc.. I've got clients with $25K accounts that leg spreads manually. Depends on who you clear, the experience of the Risk Manager, and your own reliability in terms of how long you keep legs unhedged. As I mentioned earlier, I teach my clients to split the difference between order book DOM's and leg quickly.
I am not a spread trader. I wanted to execute a simple 2-leg spread to generate a capital loss on one of the legs, running the spread position on low margin, thanks to SPAN-compliant margin reduction. My understanding is that even if, for any reason, I do not put down enough capital to maintain one leg in a "naked" state, I will be able to get out of the whole position anyway simply by pressing the "Liquidate all" button, or phoning my broker. Is that right?
What you can do is just take the position off in smaller lots. You send a basket order to close half the position, or just take a couple lots off one leg and then take some off the other until you can send an order to get flat. You can run into problems if you send an order to close both sides and the risk check rejects one or both of the orders. It's not a big deal unless you are trying to trade the spread quickly, in and out relatively fast.
I hear what you’re saying - it’s a bit suspect. For you to enjoy a SPAN margin credit you have to spread HIGHLY correlated products. If you can manage, as you so generously assume, to be able to accurately predict which of these highly correlated products will be stronger or weaker versus the other in a reliable, repeatable manner be a spread trader and make a fortune.
Do you understand mark to market? You know that any loss is immediately removed from your account right?
I was thinking of doing this with Nikkei 225 USD vs Nikkei 225 JPY at a 10:9 ratio enjoying a margin reduction of 98% as set by CME. With this ratio I cannot take off only part of the position as it does not have a common divisor. You made me think - if I close the losing leg but do not take the profit on the other leg I will not have this "virtual" profit available as margin to re-open the position in the leg I have just closed. Is that correct? In that case, this will not work in practice.