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For CL, do spread prices lag the outrights? and if yes, should i be looking at the front month or the nearer contract in the spread?
From what i have read spreads could get heavily influenced by larger players and that might mean they manipulate one leg to affect spread prices and thus might not make sense to correlate the spread price to an outright price... but just thought id ask
From also what ive read... front month prices are heavily influenced by a variety of factors .. i am strictly looking at the 12 month Z contract.. so will be looking at Z18/Z19 for sometime and as someone here suggested.. maybe start disregarding that and start looking at Z19/Z20 as we get into late summer (not sure when is too close!!!!)
Can you help answer these questions from other members on NexusFi?
I'm just wondering if these videos and slides are still around somewhere as they were posted a while back (thanks SMBJC). I can't find any reference to it with Google, other than in this thread. Maybe they were saved by some of the members here?
I am reading the below and trying to understand it well.. so would it be possible to provide example of adjusting calendars with say M and Z as examples..
So lets say I am long the 12 month Dec 18 calendar and I am wrong or want to hedge
a) Would i go short the 12 month Dec 19 calendar? Can i do the same with the 6 months as well
or
b) I know i want to hedge.. but i will look for some contract to short which seems overvalued and not necessarily the 12 month or 6 month but just hunt for what seems overvalued?
Again like u said below, its more about constantly putting on and removing trades which are either overvalues or undervalued?
Of course if the answer is B, then different calendars have different ATRs and thus quantity might need to be adjusted.. i.e. since a 1 month calendar moves less, i might need more of the 1 month calendars to hedge against a 12 month calendar - right?
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
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If your wrong you should get out. Only reason you should ever hedge a wrong, bad or losing position is if you can't get out of the actual position.
I'm not trying to hedge. I'm trying to buy and sell based upon relative value. This works well with butterflies because they are a lot more mean reverting. This doesn't work so well on individual calendar spreads because calendar spreads can be very fix price dependent. So I would never be short a 12 month calendar as a value trade. value changes to quickly. Now I might be short the 12 month calendar versus something else.
Ha. Yes. Well Done.
There's so many different ways of measuring/gauging volatility. ATRs is difficult for spreads and butterflies. Percentage returns don't work either. (If a spread moves from +0.01 to -0.01 is that a -200% move?). So I tend to just look at the standard deviation of absolute price changes.
Something else you can do is calculate hedge delta's for each spread in terms of the outright contract and then maintain a delta hedge that way.
Am I on the right track? Find a kink in the curve, then fly chart for that kink going up while the surrounding fly charts are stationary? Just confirming curve trade basics, before I integrate the curve actually moving, scatter plots, etc.
... I guess these one month fly trades must need to be on for weeks...
I guess if I work this out it can be applied other futures.
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,052 since Dec 2013
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Interesting.
I have a chart that looks a lot like that. You can also see why I try and stay out of the prompt 6... where the fundamentals can strongly take over.
While the settlements are relatively accurate there's definitely some noise in there, especally since the CME changed their settlement algo back on November 6th (you can see the increased variability in settlement since then in your chart.) That fly is currently -3/-1 and has been for a while, so those +1 settles are definitely bad settles. But your underlying hypothesis is I believe correct.
Some background - Prior to arriving here at futures IO, I traded traditional TA using support and resistance, candlesticks, fibs, harmonic patterns and Elliot Wave. Was successful in Forex, but not so much Futures. ( I made the switch to futures when FXCM exited the US market. ) Let’s just say “it’s been a learning curve”.
Well, with Futures IO I have discovered the “next evolution” at least for me – volume! I read Keppler and Stiedlemeyr, and was on my way. Almost on cue Ninja Trader comes out with their order flow + suite and I am off to the races. Ordered NOBS Trading course, makes sense, lots of good stuff. Browsed a lot of the Wyckoff VSA stuff, and read up on Tom Williams and Gavin Holmes. And then, lo and behold, come to find out my harmonic pattern developer neoHarmonics ( Daniel Crystal) - has a Price Action Analyzer (PAA)which is based on market profile and VSA principles.
So I tested the PAA with some market replay on several markets, and with what I have been learning from the other volume stuff, felt confident enough to take it live. Traded CL using 4 range bars and the default settings of the PAA
Notice the VSA signals have confluence with key Fib retracement levels and harmonic patterns. And, at least with CL (4 range, RTH data series) the stopping volume signal has a high % of predicting turning points. I know true DOM watchers like John Grady say “turn off your charts and just watch the DOM”. I am seeing VSA is somewhere in between, but both are clear on one thing – trade with the smart money…and volume = smart money.