NexusFi: Find Your Edge


Home Menu

 





Two hedge ratios for crush spread


Discussion in Commodities

Updated
    1. trending_up 1,219 views
    2. thumb_up 4 thanks given
    3. group 2 followers
    1. forum 4 posts
    2. attach_file 2 attachments




 
Search this Thread

Two hedge ratios for crush spread

  #1 (permalink)
opi5981
Beijing,China
 
Posts: 22 since Sep 2021
Thanks Given: 4
Thanks Received: 9

I found occasional inconsistencies when calculating the two proportions.
The following three spread calculation methods are:
1: 2.2*ZMF23+11*ZLF23-ZSF23
2: 11*100*ZMF23+9*600*ZLF23-10*50*ZSF23
(11:9:10 Calculate the value of the contract combination)
3: 100*ZMF23+600*ZLF23-50*ZSF23
(1:1:1 to calculate the value of the contract combination)

https://www.cmegroup.com/trading/agricultural/grain-and-oilseed/soybean-crush-spreads.html
CME informs that the 11:9:10 spread is more accurate, but the deviation from the theoretical formula of 0.022\0.11 in the daily chart comparison is much larger than the 1:1:1 spread.So which scale should I use to be more representative?
Because I'm currently using sc, I can't see the SI spread provided by CME, can someone provide me with a screenshot of the price chart of the SI spread tool and a screenshot of the DOM of the SI, I want to confirm whether my calculation is correct. By my calculations, the current SI price should be around 172 (at the current posting time).
I have another question, where can I check SPAN margin requirements for SI spreads?

Reply With Quote

Can you help answer these questions
from other members on NexusFi?
Exit Strategy
NinjaTrader
Increase in trading performance by 75%
The Elite Circle
How to apply profiles
Traders Hideout
Pivot Indicator like the old SwingTemp by Big Mike
NinjaTrader
Better Renko Gaps
The Elite Circle
 
Best Threads (Most Thanked)
in the last 7 days on NexusFi
Just another trading journal: PA, Wyckoff & Trends
29 thanks
Tao te Trade: way of the WLD
24 thanks
Diary of a simple price action trader
21 thanks
My NQ Trading Journal
14 thanks
HumbleTraders next chapter
10 thanks
  #2 (permalink)
 
SMCJB's Avatar
 SMCJB 
Houston TX
Legendary Market Wizard
 
Experience: Advanced
Platform: TT and Stellar
Broker: Advantage Futures
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,048 since Dec 2013
Thanks Given: 4,384
Thanks Received: 10,206

11:9:10 spread is more accurate than 1:1:1 when it comes to tracking the actual profitability of the crush process, but 1:1:1 is a much simpler approximation.

Globex actually has exchange spreads where you can trade things like this spread avoiding all the legging risk. For the crush spread the symbol is SOM. So buying 1 SOM will mean you are actually buying 11 Soybean Meal, buying 9 Soybean Oil and selling 10 Soybean all in one trade. I'm very surprised that they don't also have a 1:1:1 exchange spread.

https://www.cmegroup.com/education/files/soybean-crush-reference-guide.pdf

Regarding margin, the link below shows that the margin credit for the 11:9:10 is 88% meaning that the margin required for the spread is only 12% of what the margin would be for all the legs added together. Although not listed it appears the margin credit for a 1:1:1 spread is 86.3%,

https://www.cmegroup.com/markets/agriculture/oilseeds/soybean-crush.margins.html#marginsTab=INTER&pageNumber=1&sector=AGRICULTURE&clearingCode=06

CME has a great online margin spread calculator. You have to sign up for it (it is free) but well worth it for questions like this. Here is an example of what we are talking about. Worth noting is how much smaller the margin requirement is for the 1:1:1 vs the 11:9:10 which if you have a smaller account could be important.


Reply With Quote
Thanked by:
  #3 (permalink)
 
SMCJB's Avatar
 SMCJB 
Houston TX
Legendary Market Wizard
 
Experience: Advanced
Platform: TT and Stellar
Broker: Advantage Futures
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,048 since Dec 2013
Thanks Given: 4,384
Thanks Received: 10,206


Margin... those are probably member rates, so non-members will be 10% higher

Reply With Quote
  #4 (permalink)
opi5981
Beijing,China
 
Posts: 22 since Sep 2021
Thanks Given: 4
Thanks Received: 9

Thank you very much for your reply. Does the membership margin of the exchange mean that you need to have a trading seat on CME? Is the SPAN margin automatically applied or do I need to apply to FCM to use it?
SMCJB View Post
Margin... those are probably member rates, so non-members will be 10% higher


Reply With Quote
  #5 (permalink)
 
SMCJB's Avatar
 SMCJB 
Houston TX
Legendary Market Wizard
 
Experience: Advanced
Platform: TT and Stellar
Broker: Advantage Futures
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,048 since Dec 2013
Thanks Given: 4,384
Thanks Received: 10,206

The online SPAN calculator is free, you just need a CME login, which you can sign up for.

You first setup a portfolio (only important thing is the name of the portfolio, you can put anything in firm and account fields). Then when portfolio is setup just add trades. I search under the Globex symbol box to the right, add position at bottom right, then add to portfolio.

Membership to an exchange gives you both reduced trading fees and reduced margin requirements. Note that their are different memberships - it's not just one. So I have a NYMEX membership so I get reduced rates and margin on NYMEX Products (Crude, NatGas etc) but I pay non-member rates on the CME exchanges COMEX, CBOT, CME etc.

Reply With Quote
Thanked by:




Last Updated on September 19, 2022


© 2024 NexusFi™, s.a., All Rights Reserved.
Av Ricardo J. Alfaro, Century Tower, Panama City, Panama, Ph: +507 833-9432 (Panama and Intl), +1 888-312-3001 (USA and Canada)
All information is for educational use only and is not investment advice. There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
About Us - Contact Us - Site Rules, Acceptable Use, and Terms and Conditions - Privacy Policy - Downloads - Top
no new posts