Stationarity in calendar spreads

Discussion in 'Commodity Futures' started by MrAgi1, Jan 10, 2023.

  1. MrAgi1

    MrAgi1

    Is it possible to get closer to stationarity by combining 2 of the same futures contract but for different expirations (calendar) to form a pairs trade?

    1E78F0F1-9E45-464F-8105-5D4EE035D0CC.jpeg
     
  2. traider

    traider

    Good job you are on your way to finding the holy grail
     
    MrAgi1 and trade4succes like this.
  3. Maybe, if you look hard enough. I can't think of an example that is guaranteed to take any of the [ts2,ts6] out of the equation. As traider said, it's akin to finding the holy grail.
     
    MrAgi1 likes this.
  4. the only problem is ts2, other are perfect to trade
     
  5. MrMuppet

    MrMuppet

    hey look...he's onto something :)
     
  6. drm7

    drm7

    Most futures calendar spreads behave similarly to the underlying (in terms of trending vs. mean reversion - the spread could move opposite the underlying however). Spread traders looking for mean-reverting trades generally construct butterfly or double-butterfly spreads. However, transaction costs are much higher and you can still get killed by a freak outlier.

    TL;DR. No free lunch, but look into butterfly futures spreads for your analysis.
     
    MrAgi1 likes this.
  7. MrAgi1

    MrAgi1

    Got it. I would look into that. Thanks.
     
  8. MrAgi1

    MrAgi1

    If you don’t mind, please what is that ts2, ts6 stuff?
     
  9. Overnight

    Overnight

  10. Your picture
     
    #10     Jan 12, 2023
    MrAgi1 likes this.