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Seasonal Trades


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Seasonal Trades

  #221 (permalink)
mosalem2003
Toronto
 
Posts: 102 since Apr 2019
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Thanks a lot @myrrdin ..you have provided enough information for me to do some hoem work on my side. I will follow up accordingly. Thanks a lot for your help!

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  #222 (permalink)
 myrrdin 
Linz Austria
 
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mosalem2003 View Post
Thanks a lot @myrrdin ..you have provided enough information for me to do some hoem work on my side. I will follow up accordingly. Thanks a lot for your help!

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You are welcome. Good luck !

Best regards, Myrrdin

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  #223 (permalink)
mosalem2003
Toronto
 
Posts: 102 since Apr 2019
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Which broker can allow access to exchange spreads for retail ? Or who are the brokers that would recognize spreads and reduce the margin as per SPAN. I want to trade yield curve spreads and commodity spread but not sure if any retail broker can understand it. I am with AMP and IBKR now.

Ex : If I want to trade NOB spread 5 ZN - 2 ZB... This is 7 contracts to leg it and can be a huge margin if not treated from the broker as spread.. also how can I trade the symbol NOB to reduce the accuracy requirements and timing of legging .. This is not a clear area in the retail .. any recommendation of brokers who allow or recognize spreading or tools or platforms are appreciated. I use Sierra Chart and IBKR TWS..

I believe that you trade them easily and have no issue with this topic but not sure why every broker I consult seems not aware of the reduced margins specially for yield curve treasuries spreads ..


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  #224 (permalink)
 myrrdin 
Linz Austria
 
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mosalem2003 View Post
Which broker can allow access to exchange spreads for retail ? Or who are the brokers that would recognize spreads and reduce the margin as per SPAN. I want to trade yield curve spreads and commodity spread but not sure if any retail broker can understand it. I am with AMP and IBKR now.

Ex : If I want to trade NOB spread 5 ZN - 2 ZB... This is 7 contracts to leg it and can be a huge margin if not treated from the broker as spread.. also how can I trade the symbol NOB to reduce the accuracy requirements and timing of legging .. This is not a clear area in the retail .. any recommendation of brokers who allow or recognize spreading or tools or platforms are appreciated. I use Sierra Chart and IBKR TWS..

I believe that you trade them easily and have no issue with this topic but not sure why every broker I consult seems not aware of the reduced margins specially for yield curve treasuries spreads ..


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The NOB spread 5 ZN - 2 ZB can be traded at IB at a margin of $4500. This is a reduced margin compared to the margin for 2 outright ZB futures.

Best regards, Myrrdin

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  #225 (permalink)
Sagal
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mosalem2003 View Post

I believe that you trade them easily and have no issue with this topic but not sure why every broker I consult seems not aware of the reduced margins specially for yield curve treasuries spreads ..


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Effectively, Saxo bank is one of, I guess many of the brokers in Europe, that do not yet apply SPAN rules, so it is a no go for trading the spreads until this is changed for me...

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  #226 (permalink)
M4STR0
Florence
 
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Just use Interactive Brokers they know about spread trading and apply low margins for that.

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  #227 (permalink)
 myrrdin 
Linz Austria
 
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Sagal View Post
Effectively, Saxo bank is one of, I guess many of the brokers in Europe, that do not yet apply SPAN rules, so it is a no go for trading the spreads until this is changed for me...

Spread margins at Interactive Brokers are significantly lower than at Saxo Bank.

It seems to me that Saxo Bank is more interested in day traders, using CFDs or outright futures.

Best regards, Myrrdin

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  #228 (permalink)
 
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 SMCJB 
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myrrdin View Post
Spread margin depends a lot on the commodity. In the metals, spread margin is very low (compared to the margin for the outright), whereas in the meat markets it is very high. Grains and energies are somewhere in the middle. And of course spread margins depend a lot on the time between the expirations of the two futures. CLH-CLZ takes more margin than CLH-CLJ.

It's funny that you should say that because I actually think the opposite for Metals vs Energies. but in this case we are both right since we are talking about different things! You are talking about spreads, and I think about butterflies. Just like a spread has significant less risk than the outrights, a butterfly has significantly less risk than spreads. In the Energy markets they actually have additional margin discounts for Butterflies but in the Metals they do not. Hence for Butterlies, Metals are a LOT higher margin than energies.


mosalem2003 View Post
Thanks a lot @myrrdin - Is there any numerical examples-- I am using Sierra Chart and assume that I enter a spread on NG or CL on front and bank month.
Will the broker recognize it as a spread or the exchange ? Actual numbers might help to understand as my broker support team doesn't know it.
Or should I use a specific broker or platform that will automatically provide different spreads and make the reduced margin.
How long is these trades ? Is it long term for a month or quarter or is it intra-day ?
My background that the treasuries spread can be traded intra-day as all institutional traders execute it . Is it intra-day style on your side?
I have seen also another platform or service called seasonalgo .. which one is better MRCI or this one ? or what are you guys using? I hope to see some tutorials on the web but it seems an overlooked topic. Any more info is appreciated.

For CME a lot of this is available on their Website. Go to the product page and then click on margins

So for Gold outrights you can see its $10000 per contract.
https://www.cmegroup.com/trading/metals/precious/gold_performance_bonds.html#sortField=exchange&sortAsc=true&clearingCode=GC&sector=METALS&exchange=CMX&pageNumber=1
For Gold spreads it drops to $600!
https://www.cmegroup.com/trading/metals/precious/gold_performance_bonds.html?marginsTab=INTRA#sortField=exchange&sortAsc=true&clearingCode=GC&sector=METALS&exchange=CMX&pageNumber=1
But for a gold Butterfly it's $1200 (2X$600)

Prompt Crude is $4500. Note for crude, which month your trading changes the margin requirement!
https://www.cmegroup.com/trading/energy/crude-oil/light-sweet-crude_performance_bonds.html#sortField=exchange&sortAsc=true&clearingCode=CL&sector=CRUDE+OIL&exchange=NYM&pageNumber=1
For spreads and butterflies in Crude it very much depends upon the actual spread structure. For example if you look about half way down you will see the margin requirement for M21/N21 spread is $125 and the requirement for a M21/N21/Q21 butterfly even lower at $75.
https://www.cmegroup.com/trading/energy/crude-oil/light-sweet-crude_performance_bonds.html?marginsTab=INTRA#sortField=exchange&sortAsc=true&clearingCode=CL&sector=CRUDE+OIL&exchange=NYM&pageNumber=1


mosalem2003 View Post
I assume that I will need to leg into the spread construction and somehow their trade desk can recognize it as a spread. Assume I entered a trade of front month at the day start and by end of the day I legged into a spread then they should match it as a spread margin. I will check with their trade desk specialist to get their feedback.

How you get into the spread is irrelevant. The minimum margin requirements are set by the exchange, and the SPAN system looks at your total position and decides what the margin requirement is based upon a predetermined set of rules. While there is no need to have a deeper understanding of how SPAN works, I do find that understanding details like this will improve your understanding of not only margining but also risk in general.

https://www.cmegroup.com/clearing/risk-management/span-overview.html


myrrdin View Post
The NOB spread 5 ZN - 2 ZB can be traded at IB at a margin of $4500. This is a reduced margin compared to the margin for 2 outright ZB futures.

Best regards, Myrrdin

For some strange reason I can't find this on the Website. I did run it through PC SPAN though. Exchange min on the 5:2 NOB spread is $3750 Maintenance, $4125 Initial. So if thats right IB is about a 10% premium to exchange minimums.

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  #229 (permalink)
 myrrdin 
Linz Austria
 
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SMCJB View Post

For some strange reason I can't find this on the Website. I did run it through PC SPAN though. Exchange min on the 5:2 NOB spread is $3750 Maintenance, $4125 Initial. So if thats right IB is about a 10% premium to exchange minimums.

That sounds very reasonable. IB is usually a little bit higher than SPAN, with some exceptions: E.g. for naked short options they are much higher.

Best regards, Myrrdin

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  #230 (permalink)
 myrrdin 
Linz Austria
 
Experience: Advanced
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Trading: Commodities
Posts: 1,938 since Nov 2014
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MRCI suggests entering the NGX-NGK and the NGZ-NGM spreads in the second half of February or first half of March, respectively.

There is a good relation between "Best Equity Amount" and "Worst Equity Amount".

The trade worked in 14 of the most recent 15 years.

The spread is not far above its multi-year lows.

This year, I enter a little early, trying to use the current high price of Natural Gas as a consequence of the cold weather as an entry point.

My (conservative) target is around the highs in December / January.

Best regards, Myrrdin

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Last Updated on May 4, 2021


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