Statistical Arbitrage on Index Futs

Discussion in 'Index Futures' started by ig0r, Feb 8, 2004.

  1. Sashe

    Sashe

    1) Draw a daily line chart of the YM/ES spread
    2) Draw RSI (2) of the spread
    3) Draw 34 ema of the spread
    3) Go long (buy YM/short ES) when RSI (2) goes below 10
    4) Close position when spread touches 34 ema

    Reverse the rules for shorting the spread (RSI(2) goes above 90)

    Tips: If after buying the spread it keeps going down, I would add every day while RSI (2) is still below 10. My experience have shown that the spread keeps returning to its 34 ema like a clock work.
     
    #11     Feb 12, 2004
  2. Sashe

    Sashe

    Also I am using my method not only on daily but on 30 min and higher time frames. (60, 120)
    Lower time frames arent efficient due to slippage and commiss.
     
    #12     Feb 12, 2004
  3. So, this really works the same like all the other stuff...:cool:
     
    #13     Feb 12, 2004
  4. Cutten

    Cutten

    These work in all related stock indices. Dax/Eurostoxx is a favourite of mine.

    Big divergences tend to happen most when a big stock in one index has news, and that stock is not in the other index (or has a much smaller weighting). Once I had Dax/Eurostoxx blowout huge on me - Nokia had a profit warning (it's in the Eurostoxx but not in the Dax).

    So make sure you know the big index components that are not shared, and keep an eye on them - especially if earnings are out, or some news has come out. That way you can avoid some of the big blowouts. Also you can sometimes "feel" the blowouts coming, as one of them has a persistent bid (or offer) relative to the other. A final defence is not to hold on for too long - if your spread doesn't converge within a few mins, it's more likely to be bad, so cut your losses.

    The thing I like about this approach is it has a defineable edge and limited risk. If you enter well, sometimes you don't even have to put on the spread, you can just immediately exit your entry for a quick scalp profit.
     
    #14     Feb 12, 2004
  5. ig0r

    ig0r

    Interesting, I'll see how that charts later. I use rsi(2) in some of my swing trades, I like the setting very much for rsi. Was wondering, what kind of hit rate you getting running this? What kind of profit is the average expectancy?
     
    #15     Feb 12, 2004
  6. Can it be difficult to keep conting the right number of contracts to buy/sell to do this kind of arbitrage?

    Thanks
     
    #16     Feb 12, 2004
  7. So ... how has that ym/es trade been working out for you?
     
    #17     May 25, 2004