Eurodollar Flys

[zonetrader]

I am currently looking into trading eurodollar flys, and have identified a few potential trades, the problem is I don't really understand them very well. So any advice from you veterans will be appreciated.

The flys I've identified are EDH6 v EDM6 v EDU6 ask @ 1.5

The Condor identified is EDH5 v EDM5 v EDH6 v EDM6 offer @ 22

These are the 2 potential trades identified. Given the reduced risk profile of the trade I will be looking for a 3 -5 tick profit over a 1 to 2 week period. 1 tick will cover the commission (IB fee structure). I just need tro understand the fundamentals of the trade a bit better, so any comments are welcomed.

Thanks

 

[TWI]

Be careful is my advice, these are professional markets and making money in flys and condors in ED is tough enough with very low cost structures. I do not know how much you pay but is it is much over $1/lot then you will find making money in these structures tough. 3-5 ticks is asking a lot most people would be more than happy with 2 ticks before moving on to the next trade.
Best advice is to look at how the structure moves with the underlying outright, from this you can get an impression of which way round you may want to get in then what ever you do ony get in buy sitting on the bid or offer, do not just lift the bid and hit the offer or you will be giving away at least 1 tick immediately. There is probably more advice but suggest if you are determined, you just have a go in small size and see what happens. Please come back and tell us the sob story...
oh yeah.. Good luck.

 

[zonetrader]

Thanks twalker, Which of the underlyings will I be looking at, in the fly's will that be the front month EDH6, condor , EDH5.

 

[TWI]

Yeah, front month of fly will do although they will all move in the same direction to greater or lesser degrees.

 

[Chrissy T]

I think the most important part of this style of trading is, as twalker says, to work the bid and offer, and not to just give away a tick to get in otherwise you will be struggling to make any money. As for trading the front fly, I tend to leave the very front one alone as it can be more directional than the others due to the front contract not moving as much - almost pinned... this is defintiely the case for Euribor.

"The flys I've identified are EDH6 v EDM6 v EDU6 ask @ 1.5".......... this fly that you have identified is in the mid part of the curve and may behave slightly differently to what you expect. I don't trade dollars at all but some of my colleagues do and I believe it and sterling can move most around the mid-curve (sorry, struggling to explain properly!)...

 

[zonetrader]

Twalker or Chrissy T

As u are active traders of ED flys, I'm sure you've noticed that some of the flys are trading at their extreme high, is this due to the tightening fed policy or just temporary in which case we might well see these flys come off their highs. How do u know what the average spreads of flys should be trading at, is this just a case of studying them over a period of time (i.e experience) or using some complicated bond mathematics.

 

[Chrissy T]

Yes, some of the fly's are trading at highs but thats because they have a directional element to them and I'm sure you will have noticed the direction of the market outrights has largely been downwards! You could look to sell the highs (on a technical basis) but my guess is that these fly's will prob make new highs as the market comes off even more....

Twalker or Chrissy T

As u are active traders of ED flys, I'm sure you've noticed that some of the flys are trading at their extreme high, is this due to the tightening fed policy or just temporary in which case we might well see these flys come off their highs. How do u know what the average spreads of flys should be trading at, is this just a case of studying them over a period of time (i.e experience) or using some complicated bond mathematics.