Does anyone have any suggested reading (books, sites, newsletters, etc.) on spread trading futures? Thanks in advance
For anyone else who his looking try here. http://www.elitetrader.com/vb/showthread.php?s=&threadid=223378&highlight=joe+AND+ross
TRADING SPREADS AND SEASONALS, by Joe Ross is a good start (just a start, though.) If you search around, you can probably find a copy on the internet. The dead-tree version is $150. I also signed up for his free weekly newsletter. His staff sends a spread trading recommendation every week. It's good to see their logic and also to follow up to see how it works out. They also follow-up previous trades to show you how they managed them. If you want more recommendations, you have to buy the full newsletter. I can't vouch for the newsletter's effectiveness - I use it as a learning tool more than anything else, and only get the free version in any case. www.spread-trading.com
Look at the CME and Eurex websites under the educational resources section. You should be able to find both white papers in .pdf format as well as some webinars. None are universal, and tend to be quite specific in terms of applicability. Also, please be very, very cautious about mean reversion or 'fair value' strategies these days. Fading one or two sigma moves, channels / bands, and Fibo levels has been a real shit show for a few years now.
Thanks for the suggestions. I am trying to put on a few paper trades while I am getting my feet wet. Pulling the idea from the spread trading newsletter how does one enter intermarket spreads. I am looking to go long May Soybean (/ZSk2) and short May Corn. Since I cannot enter a limit order, I am assuming one would have to leg into each.
There are a lot of books on spread trading. I've ordered but haven't yet read (all of) the following The Complete Guide To Spread Trading What I Learned Losing A Million Dollars Spread Trading by Howard Abdell Real-Time Proven Commodity Spreads George Angell I know some of these were quite good. I'm currently experimenting with some vertical bull spreads on the commodities. I think a binary option or constant volatility contract could also be useful for my purposes. So, I'm interested in modeling some custom spreads but nothing yet.
Yep. For the purposes of accurate paper trading ( P&L, drawdowns, etc. ), make sure that you mark each leg at the exact same time.
The other noteworthy point is that nearly all of the calendar spread combinations, including flys and condors, can involve exchange-supported implied spreads - which are one of the best inventions in the futures arena in the past decade. Revolutionary. Point being, those bid/ask spreads and settlements for the exchange supported implied spread markets will be much more accurate than isolated leg prints. Latent time & sales will really compromise what most newbies who choose to go it alone assume versus reality. You have to be mindful of latent prints on individual legs, and how that influences your strategy and price modeling. Very, very important.