Sorry, guys. Alot of the stuff on Elite has been quite boring as of late, and I've tuned out for the most part. Multiple legs of three or more. Let's take three for illustration's sake - a butterfly. Quite institutional, if I say so myself. Can brokers do them? Certain ones - absolutely. For pit traded products you must choose a competent brokerage that is geared towards institutional clients - NOT retail unless they have a give-up agreement for a competent floor broker who does spreads for a living. Just give them the contracts and price levels, along with a GTC order. Don't ask me who to use. But ask your broker if he can find the best spread floor broker for you. For electronic markets - which I trade exclusively now, you can do it all for yourself. The ability to 'make markets' helps the endeavor considerably in terms of getting the best price levels. And I'm going to keep harping on this - confining spread strategies to 'seasonals' is to do the craft a great disservice.
Thanks for your input. It is much appreciated. I understand your perspective on the 10% issue, especially in light of IR products which have 1000's of possible combinations taking into account cash, futures, options and all the maturities. If I have this correct, I think alot of the participants in the spreading forum are searching for an an approach that enables them to better control risk or something that may lend itself to consistency in their trading pursuits. Especially if the alternative is trading front month outrights or strikes with wide markets and thin liquidity. So the 10% is a good place to start and a great introduction into all the other possibilities once one has some degree of competency. More so if it's coming from a retail perspective. But def. by no means the be all-end all of this age old craft. I think the forum welcomes all the different voices. Whether one's been membership or a retail guy displaying consistency from a home computer. Everyone benefits. Well now I have chatted it up a bit, I'll shut my NECK !! Thanks again, J-Law
Why would I want to get out of a position that still has potential if I could protect my self from an adverse move ... even if my position is a spread. Case in point : I have been long the SN3/SX3 spread for a couple of months now for a decent profit. The spread has entered into a "trading range" and the only option is to continue to be exposed to risk. Now if there is a way to protect profits from erosion, I'd be interested.
Spreadem, I misinterpreted what you were asking. Sorry. Other than options, I can't think of another way to hedge such a position. Doesn't mean that others don't exist. Maybe entering in to the opposite position in another acct. You would be market neutral & locked in with a profit. With options, you could obviously buy a put and a call for the respective futures legs in the proper months. That may be expensive though. I haven't looked at the ATM's on either. It would give your acct the profile similar to a synthetic straddle or strangle. Long futures + long put = Synthetic call Short futures = long call= Synthetic put My guess the calls are on the "fat side" and puts cheap. If so, maybe anti up for the cheap put and maybe call spread against the July as a hedge. You'll save on premium that way. Another idea in the options if the volatility is high. Sell strikes farther out on each leg (Then each leg is like a covered write) or one leg. These are just ideas that shot into my head. Just ideas. The next notion that might shoot into your head is.... "THIS IS ALOT OF FRIGGIN WORK !!! " Maybe just give the spread a price level w/ trailing stop??? Anyone w/ hedging thoughts ???
These are the ideas that I still wrestle with; how to hedge or protect your spread. Many have argued the importance of seasonal spreads, intramarket spreads, calender spreads etc. and I agree that there are a lot of spread strategies that one can employ. But how to compensate for the risk of the spread is still to be determined.
The CBOT has just launched a portion of their site just dedicated to getting up to snuff on some of the IR spread products. http://www.cbot.com/cbot/ir/home/ Worth the read if one is looking to expand their knowledge past the conventional Seasonal plays. Best, J-Law
Thanks J-Law To know that you do not know is the best. To pretend to know when you do not know is a disease. Lao-tzu, The Way of Lao-tzu