STIR Spreads Trading Question

[clbfjc]

Hi Guys,

Sorry if this is a simplistic question..

I belive alot of people who trade spreads trade the spreads of the movements of Bund / Gilt. My question is if the Bund / Gilt is bearish and the price is falling would you sell spreads or would you but them. Obviously being barish the spread will narrow, you are looking at Interest rates rising etc.The reason i ask is becuase of the two theories below.

1.If we look at it on a from pure price perspective we would assume the long dated price would move faster than the shorter dated price therefore be selling far month buying near month.

2. However if we look at it from a Basis perspective, If interest rates rise, the Yield curve flaten's, basis is weakening, so we should be selling the near month buying the far month.

Which way do people look at this and do they apply the same logic to butterflys? Once again I am sorry if this is a simple question but hope we get a decent answer.

 

[Martinghoul]

It seems that you're confusing STIRs and bond futures. It's a bit of a mish-mash, your question. For example, if you talk about gilt/bund, what sort of a butterfly might you be referring to?

 

[clbfjc]

Hi,

I am talking about looking at the BUND, and then trading Euribors off it, or looking at the Gilt and trading Short Sterling off of that. Therefore if I am bearish on either the Bund or Gilt i.e expecting rates to rise should I be selling spreads / butterflies or buying them. The reasons for asking are as per below,

i.e you would expect the Long end to move more than the short end therefore should be selling the long end buying the near, but from a yield curve basis perspective the yield curve will flaten hence should be selling the near month buying the far.

Can I take it from your response you would be looking the other way round if you where trading say the Bund/Bobl spread.

 

[arabianights]

If you have a view on the bund, why don't you just trade the bund?

As a general rule buy say 3rd white V 3rd red spread if bearish on bund and vice versa...

 

[clbfjc]

Hi,

So you are saying, that if the Bund is coming down in price buy near, sell far..

 

[clbfjc]

Hi All,

As somepoints have been raised, further to my question do alot of people trade STIRs by watching the Bund activty, and also are people spreading on here or are we trading the outrights.

 

[arabianights]

Hi,

So you are saying, that if the Bund is coming down in price buy near, sell far..

Ceteris paribus yeah

Hi All,

As somepoints have been raised, further to my question do alot of people trade STIRs by watching the Bund activty, and also are people spreading on here or are we trading the outrights.

Bit of everything. I wouldn't use the bund as your only indicator but it is probably the most important market to watch, most of the time...

 

[natalietrader7]

hello!! I am new and I would like to trade euribor calendar spread. which broker is best as I have 10000 pounds to start with. I would look for low commisions specially if I want to earn money on calendar spread. many thanks for your advice.

 

[etem_tezcan]

hello!! I am new and I would like to trade euribor calendar spread. which broker is best as I have 10000 pounds to start with. I would look for low commisions specially if I want to earn money on calendar spread. many thanks for your advice.

commissions start from 0.8 gbp and go to 1.8 gbp/rt.

0.8 commission requires at least 500 gbp/month platforms, high volume (marex requires min 2k volume), min deposit of 20k (these are arcades)
1.8 gbp ones are retail platforms (no volume req, 3-4 k acct opening)
make sure your platform allows trading spreads such as cqg trader, cts t4, x-trader.
ninja trader and strategy runner will not suffice
pm for further info