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Discussion in 'Index Futures' started by esc_trader, Dec 22, 2002.

Selling at 31-33

#31     Jan 3, 2003

I haven't calculated exactly what the margin is for the spread with IB. I believe it is about \$3500-\$3700, which seems reasonable, but I'm sure there are more favorable terms among other futures firms if that is of primary importance in your trading.

#32     Jan 3, 2003

Sell (adding to position) at 35-37

#33     Jan 3, 2003

esc trader.Thanks for your posts. I have a ? . do you do the spread 1 for 1 i.e buy 1 e dow and sell 1 emini? Thanks

#34     Jan 3, 2003

Thanks to all who have shown interest in this thread.

This is some of the methodology that I use in trading this spread.
I have seen it done by dividing one price by another and using that ratio (and other variations), and of course, there are other equally valid methods being used. I prefer to do it this way, just so that I use whole numbers and can calculate quickly in my head if necessary.

Multiply the S&P price by 9.5 and subtract the DJIA price (front month futures on both). This gives me a whole number price for the spread, for instance I may be "selling the spread" at 30 and buying it at 22. Each point is worth \$5 per contract.

9.5 is roughly DJIA divided by S&P, and is used as the multiplier for that reason (and to get our "hypothetical mean", that is, the value the price should revert to - around 0). DJIA is roughly 10 times the value of S&P, and since the point value of S&P = \$50 and DJIA \$5 contract = \$5, the ratio of contracts is 1:1 (S&P emini to DJIA \$5 multiplier), so "selling the spread" refers to selling 1 S&P and buying 1 DJIA. The opposite for buying the spread.

#35     Jan 4, 2003
6. ### Gost

Answering my own question actually the best way to find out margin for various situations for IB clients to simulate a trade in demo mode, although prices there are fake, but margin calculation seems to be real.

What I found out, that overnight maintenance for ES/YM spread is about 4500 USD, which is less then just adding one margin to another (that would make a 4850) but still a way higher then it would be logical for this spread.

For example 2 contracts of NQ/ 1 contract ES spread will have about 2000 only. But this spread is significantly more volatile. The only explanation I found, that YM is other exchange product and therefore risk calculated much higher then for CME own products... But that's my assumption only.

#36     Jan 4, 2003
7. ### nugya

Thank you for sharing this info with us. I have one question;

Thanks

#37     Jan 5, 2003

I don't know the historical correlation, beyond looking at the daily correlation roughly over the past year, just to get a general idea.

My opinion is that historical data provides poor indication of future results and may be even be detrimental when providing a false sense of security. (You get the idea here that I don't put much faith in standard deviations and historical patterns)

Of course, a trend in the spread price is the risk in this type of trading. I have observed that the spread usually is not subject to trend except during periods of overall market trending, and will take at least a few days to do so significantly. I try to keep my holding periods as short as possible (seconds to minutes is preferable), to get as many profitable trades as I can to compensate for the losses I will have to take when a trend in the spread sets in, which from my experience may happen over a period of a few days.

#38     Jan 6, 2003
9. ### ptt

I have been following your method. This went pretty far against your position today, when do you call it quits?

#39     Jan 6, 2003