Effect of Outright on Spreads, Calenders, Boxes...

[ikarus_wolf]

I'm on a course at a prop house at the moment and require some help in certain areas...
Currently trading ICE Brent Crude Futures.
July, Aug, Sep, Oct, Nov.

What effect do the outrights have on calender and box spreads?
We've been told we will mainly be trading box spreads and have done some sim trading already. I don't see any valid strategy or know of any yet.

Appreciate any comments and help.
I'm a complete novice so please forgive the ingnorance.

 

[rosehound]

I'm on a course at a prop house at the moment and require some help in certain areas...
Currently trading ICE Brent Crude Futures.
July, Aug, Sep, Oct, Nov.

What effect do the outrights have on calender and box spreads?
We've been told we will mainly be trading box spreads and have done some sim trading already. I don't see any valid strategy or know of any yet.

Appreciate any comments and help.
I'm a complete novice so please forgive the ingnorance.

In Brent (and WTI) often the direction of outright price moves can give you a lead on spread moves. if flat price sells off you would expect more often than not that the near spreads (consecs and jun/dec-dec/dec's) sell off, so your calendar spreads, and flys come off too. the idea being that the back of the curve is relatively more static in value than the front - obviously doesnt always hold true.

another factor will be fundamentals - so if the eia's come out and show a huge build in padd2 (cushing) then the front of wti takes a hit, that means your brent/wti boxes get sold off too, along with the flat price.

valid strategies for spreads and boxes are mean reverting plays, seasonal (not too sure on these) and fundamental plays. they also hold up fairly well for technical analysis, as well as anything else does I mean.

hope some of that helps - out of interest, what firm are you with?

 

[ikarus_wolf]

Thank you very much, that did help. I've been trading live just over a week now and have done ok so far. The ICE Brent flys are nicely paced at the moment and this is good for beginners to get started on. Am very cautious and weary of the market nonetheless. My strategy at the moment is simply to identify ranges and work with them. My understanding is very limited and I'm working hard on building it up.
I'd rather not mention anything about where I work as it's against policy but it's a well known prop house in the square mile.
Thanks again for your time and help.

 

[rosehound]

No problem.

Think today is a nice example of what I was talking about. Flat price Brent off two dollars, front spread off 6 ticks, front fly off two ticks from yesterday's settlement so the bad sentiment in the market re: Euro/sovereigns etc drives down flat price and the front of the curve kind of cascades into the move, makes a lot of sense really and probably a good way to take a view without getting hammered on outrights.... obviously small moves but you do need size for flys i guess.

out of interest, how do you go about deciding levels/ranges? heard the old one about buy 15 under sell 15 over on the front fly, and you obviously take considerations like cushing issues into account (for wti/boxes) but on the whole is it pretty mechanical? or is there more discretion in deciding if a level will hold?

also interested in how you fill them - work one leg and hit/lift the other? or work both (i.e. better fill but more legging risk).

Understand you might not want to go into too much detail, but I'd be keen to hear anything you might like to share. Cheers!

 

[ikarus_wolf]

Had the day off so wasn't trading today which is rather disappointing but I understand what you mean. It's a very helpful way to look at things.

The way I was trained was to scalp a tick here and there. Identify the ranges and work between. Work one leg and hit/lift the other. I've been told not to leg but I still do it and my trainer/mentor knows I do. Difficult at times without it. I use the RSI of the spreads to find out roughly where the flys are going. This approach has worked so far. Been trading over a month and not had any negative days. I know this is a fluke as the flys are very stable right now. My strategy won't hold all the time I'm told.

In all honesty I don't know what I'm doing all the time. Still developing in all areas.

 

[wadams]

Hi ikarus_wolf,

I'm going to start a spread training program soon and I'm wondering your training is going.

Are your spreads still acting as predicted? What other strategies have you been able to work in?

Best.
wadams

 

[rosehound]

can get charts and look for yourself if you know the right codes!

front fly on brent

http://futuresource.quote.com/chart...650x450&d=medium&b=bar&st=BOLL(20,2);RSI(14);

same on nymex

http://futuresource.quote.com/chart...650x450&d=medium&b=bar&st=BOLL(20,2);RSI(14);

oct/nov box if you are legging across nymex/ice

http://futuresource.quote.com/chart...650x450&d=medium&b=bar&st=BOLL(20,2);RSI(14);

I dont trade in this area specifically, but lots of oil locals complaining this year. are you doing this from honolulu?!?!

 

[ikarus_wolf]

I've been trading a few months now and its starting to pick up. I'm more of a day trader / scalper so don't keep much on overnight. The odd fly occasionally. Practice and experience has helped the most. The more time spend trading the more you understand and see things.
Don't over analyse things. Best to make your own strategies. I have some decent reading material if you'd like it. Message me your email.
If you're trading from Honolulu do they have any openings????