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Of Spreads, Corn, Gappers and Reopens
Here is a good example of how the market behaves when price reached a trading limit. Here we are looking at Corn after a USDA report. Old crop July went limit down right after the data and pretty much stayed there. New crop December also sold off, but stayed above limit. Now, the exchange spread [...]
Continue reading...Calculating the Hedge Ratio for Aussie Bonds
11. February 2013
One thing you need to consider when trading spreads is what we call the hedge ratio. This article and video looks at how to calculate the ratio using DV01s for fixed interest traders.
Continue reading...Trading The Obvious
24. September 2012
In a recent update we looked at a spread trade in Corn, citing the upside move was overdone and the spread had the potential to narrow dramatically. See here. Over the last few weeks, the spread has done exactly that. This illustrates a very interesting point – unexplainable or extreme moves are often followed by [...]
Continue reading...DV01 Pricing Tools
15. August 2012
Here are a couple of tools we use in the analysis of note and bond markets.
Continue reading...Some Thoughts on Corn
12. August 2012
1. I saw some interesting stats the other day comparing 2012 with 1988 (chart below). Back then there were similar estimates for poor quality crops. Prices almost doubled then. We’ve gained only about 60% this year by comparison. That said the dollar value of the gain this time is more than double that of 1988. [...]
Continue reading...When is a Spread not a Spread
5. August 2012
Spread trading is more an art than a science, but there are a few common traps we often see new traders fall into. Mistake#1 seems to be a particularly popular one...
Continue reading...What’s all This About Exchange Traded Spreads?
1. July 2012
For many popular spreads, the exchange will make available a ‘spread market’ – or exchange traded spread. So instead of transacting twice to get into a spread, there is a specific ladder you would use to transact only once to enter a spread position. For example, this image shows the Au 3yrs, the 10yrs and [...]
Continue reading...Correlation and Lag Trades
29. June 2012
Gold and Crude Oil in normal day to day movements are not overly correlated. They do not move tick for tick or take a lead from one another as strongly as the 10yr note and the 30yr bond. However during times of volatility, that correlation can increase and they do start following each other. Additionally, it’s not uncommon to see one market lag behind the other when volatility picks up. Here is a good example...
Continue reading...Trading Gaps with Projected Values
11. June 2012
The good thing about correlated markets that open and close at different times is the potential for gap trades. The opening gap will occur when one market makes a decent move while the other is closed. Once that second market opens, you’ll most likely see a gap in the direction that the first market has moved. This article will show you how to project an open and therefore determine if a trading opportunity exists.
Continue reading...The Long and The Short newsletter
That Social Media Stuff…
29. March 2013
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