SP500, UK100 pairs trading

[shorty]

Hi all,

I do pairs trading with the UK100 and SP500 futures.
When using d4f the costs are as follows-

UK100 - spread 3points, margin 50 per £ bet
SP500 - spread 7points, margin 100 per £ bet

I've been looking at opening another Spreadbet account but I can't find anyone with as low margin requirements.
It's important cos this way of trading pays small returns but has large margin requirements.
eg I might be £50 long on UK100 and £25 short on SP500...that will rack up £5000 in margin.

Anybody care to recommend anyone, or is my next logical step onto direct access.....I should note that I'm not interested in day trading

 

[houdani]

shorty, have a look at capital spreads.they are very similar in spreads,margin etc as d4f.in fact he has his own thread on here if you look around.only snag is no 24hr trading .

 

[laptop1]

shorty

The spreads will be lower using direct access, but the margin requirements will be much more expensive.

 

[shorty]

houdani - thanks, just had a look and their spread and margin are excellent. They seem quite strict in enforcing stop losses on all trades (which I don't like when pairs trading) but if that means they are more competitive on the margin then I guess it could work. Have you any experience of working with them?

laptop1 - Margin is King !! Well it is when trading pairs anyway. I appreciate that the spreads will be lower through direct access but I don't think that would be of much use to me if you say they are gonna talk about huge margin requirements.

 

[Splitlink]

houdani - thanks, just had a look and their spread and margin are excellent. They seem quite strict in enforcing stop losses on all trades (which I don't like when pairs trading) but if that means they are more competitive on the margin then I guess it could work. Have you any experience of working with them?

laptop1 - Margin is King !! Well it is when trading pairs anyway. I appreciate that the spreads will be lower through direct access but I don't think that would be of much use to me if you say they are gonna talk about huge margin requirements.

Just seen your thread. Had a look at Fins, where I bet, and SP margin is 30 per 1 and FT is 100 per 1

Hope that helps

Split

 

[henry766]

Hi shorty , are you sure your doing what is known as pair trading and not arbitrage between ftse and s&P?

 

[shorty]

Hi Henry, the way I see it pairs trading is just one form of arbitrage trading.....I'm just trading two instruments that tend to move in a similar price pattern to give me a market neutral strategy

 

[henry766]

Good point !! do you chart the composite, and what do you use? can be tough to find good pairs software , think tradestation is bad on this , and metastock only has close prices on daily data composite's.Don't think you'll beat spread with cmc unless you trade directly , (not much margin) , have you tried options?

 

[shorty]

No, I don't use anything to chart the composite.....just a note of how far away from the 20 and 50 day ma each index is.
Haven't tried options before.

 

[henry766]

it might be worth looking at the pound doller rate aswell , years ago when i started ,i used to trade like this , followed sp500 ftse t bond long gilt and pound doller , they all correlate in a way, i think it's old fashioned but traders used to say watch the currency , think stockmarket tends to follow , but it was a while ago .

 

[shorty]

it might be worth looking at the pound doller rate aswell , years ago when i started ,i used to trade like this , followed sp500 ftse t bond long gilt and pound doller , they all correlate in a way, i think it's old fashioned but traders used to say watch the currency , think stockmarket tends to follow , but it was a while ago .

Yeah, that could be right....but I think I'm better just focusing on 2 instruments, even if it's boring. I used to get sidetracked and ended up trading oil, forex and the asian indices. I know now if I touch that damned Aussie 200 it all goes tits up !!

 

[henry766]

Well that would be a complicated correlation , but interest rates currency and bonds / gilts are very closley related .