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I'm wondering if anybody had success trading bond futures butterflies (no options)?
I've seen suggestions to trade /ZB-/UB - but high capital requirements with potential to make only 2K out of 100K over undefined timeframe.
WBR
Can you help answer these questions from other members on NexusFi?
I uh..think the 'butterfly' necessarily implies using some type of options. Otherwise what you are suggesting is simply trading the yield curve for the duration of the futures contract.
Both can be done profitably, but usually the purpose of those trades are very different from one another.
It might be better to start off asking what phenomenon and thesis you are trying to express before selecting the stategy and execution method to capture the edge.
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You created a thread entitled "Bond butterflies" but then ask about Crude Oil Butterflies. You'd probably get better answers over in one of the Crude threads.
I know nothing about Bond Flies (but would love to learn) but I do know that Eurodollar Future's (interest rates not forex!) have a HUGE butterfly market. In fact there's some links in this recent Eurodollar thread you might find interesting. Eurodollar (GE) - CME
As @LaurentM said I think there's a typo in your post and that you meant /CLH7-2*/CLJ7+/CLK7. This is what I would call a CL HJK Futures Butterfly. Before we get into discussing trading fly's let's first discuss execution and costs.
Execution In crude oil, while the exchange does list Butterflies as a stand alone product, the implied engine is NOT switched on unlike Eurodollar's where it is on. What this means is that all the orders in the butterflies are outright orders and not implied from the market itself. What this means is that many of the orders are market markers showing a price that is 1 tic wider than where they can hedge/arb it themselves. As such in my experience the best way to trade CL flies is to use an autospreader. Without a good autospreader most of your fills will involve paying away the bid-ask (even with limit orders) and I think your slippage will kill you.
Costs A futures fly involves 4 futures contracts even if executed as a single fly product. So to buy and sell a fly you are going to pay 8 sides/4 round turns. In your example you mentioning buying -3s and selling 0.5s. Crude spreads and flies unlike some interest rate and equity products are priced in full ticks so you would need to be selling 0s or +1s. Even if +1s, thats a 4 tick profit margin which is $40. Question is what are you paying for your 8 sides to make that $40? Also what is your autospreader costing you? Now lets say for every trade where you make your 4 ticks you have another where you have to wash the trade for zero. Whats your cost structure when you have a 50/50 win rate?
You're right, it was wrong example (with typo), sorry. Thanks for the link to Eurodollar futures too!
This one would be better to discuss:
/ZB-2*/ZN+/ZT
It moves in the defined range intraday, so perhaps there're opportunities there.
As for your questions on execution and costs: I'm looking for good autospreader software, so far heard only about Autospreader from Trading Technologies (screenshots look non-intuitive).