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Trading: short fut. opt., fut. spreads, div. stocks
Posts: 57 since Feb 2012
Thanks Given: 3
Thanks Received: 27
hi,
I'm looking for spread traders to share ideas with.
i have been trading futures and future optinos for many years and am now looking into (future) spread trading.
i can find only a few threads about spreads so hopefully there are some people out there...
you can either reply on this therad or send me an inmail.
to make it a bit more concrete, i have been looking at the following spread:
sell NGH14 buy NGJ14
comment welcome,
Also, what's your position sizing look like, and how is it impacted by the spread margin requirement?
No need for you to provide specifics, just something to think about. Many people starting to spread trade think the risk is less, and therefore pile on with the contracts. Trust me, you can lose money just as fast with spreads as with the outrights.
My reply already has that info: I'd be worried about seasonality in general, how this year looks relative to past years, finding the right entry point (are you trying to time the peak in NGH14), exit point / stop (this spread has moved over $2K per contract since Dec 1, so if you had put it on then you'd have been crushed), and position sizing.
Since I have not considered putting on this trade (I am short NGH14 calls, but that is a different beast), I'll refrain from giving personal opinion (after all, what do I know?). I've given you areas I would look at though.
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals, U308 and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,059 since Dec 2013
Thanks Given: 4,410
Thanks Received: 10,226
Take a look at this thread HERE the last 18 pages (page 252+) are pretty much all about March NG and to a slightly lesser extent the March-April NG spread.
NG on its daily chart has a breakout form previous resistance and is on way to move to 5 btu, currently at 4.441.
The NG H4:NGJ4 will also move up along with the outright for some more time and I would in fact go long on it with holding time of about a month if I have to trade this spread. Since the spread moves with the outright, there is not much difference in trading the calendar and the outright.
However, NG is extremely volatile and calender spreads too. Its better to combine calenders to form better looking flys/condors which have a smaller trading range and trade that with shorter holding periods.
I am still paper trading spreads and no experience with live trading spreads yet.
Trading: short fut. opt., fut. spreads, div. stocks
Posts: 57 since Feb 2012
Thanks Given: 3
Thanks Received: 27
Thanks smcjb,
Very interesting, i noticed the seasonal pattern but didn’t know the reason.
>March-April is the ultimate fear trade, short squeeze trade, and path dependent trade. Every year it trades at a significant premium, and in most years it settles at flat or more often negative (2003 settled $1.74). The question is, can you handle the drawdowns before this happens.
I guess that is what it’s all about.
I looked up the 2006 & 2007 spreads see screenshots below (bottom two are the spreads in us$ and normal points).
I think those years are different from the current situation but it good to see the spread can go to $3.5 or $35,000.
First the NG (& spread) price was high during summer and came down in the fall in both cases so no fear there after dec. 31
And as your own last charts shows, in the last 5 years only 2010 had a bit of an up move in the new year (about 0.17?)
I plan to sit out the ride, or close if the spread gets above 0.70. No better way to learn than to ride the beast ;-)
Trading: short fut. opt., fut. spreads, div. stocks
Posts: 57 since Feb 2012
Thanks Given: 3
Thanks Received: 27
Hi Indiantrader,
Any other spreads you are papertrading currently? (And you are willing to share)
Or any more general tips or good books you can give a starting spread trader?