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Spread
Scan Issue: August 22, 2007 - Volume 158
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Today we consider an inter-exchange spread: long December 07 Kansas City Wheat and short November 07 Soybeans (KWZ7 – SX7). After trading in a channel for a few months (March 2007 – July 2007) the spread finally broke out of the channel in July, to the upside. Now it seems the upper boundary of the trading channel has become support.
Traders may want to enter the spread at a value of -150. Margin for the spread is $3,930 (no reduced margin). Suggested risk is $1,500. Initial projected objective is $1,500, then a move higher. Basis is seasonal (app. 8/22 – 10/4) and a Ross hook.
On August 12 we told subscribers of our professional daily spreads & position trading newsletter Traders Notebook, "Consider entering an inter-market equity spread 500*FCU7 – 400*LCG8 at a spread value of $18,270. Margin for the spread is $2,633 (no reduced margin). Suggested risk is $1,000. Initial projected objective is $1,000, then a move higher. Basis is seasonal (app. 8/3 – 9/17) and a 1-2-3 low. Comment: This is a very aggressive entry. More conservative traders might want to enter on the next Ross hook."
Here's how we suggested managing this trade:
08/13 Suggest entering MOC tomorrow.
08/14 In?
08/20 We are close to the July high. Suggest taking some money from the table if not already done.For more information about our daily newsletter, visit our Spread Website to find out more about Traders Notebook
Questions or Comments? Please email us: support@spread-trading.com
Student's Question: Andy, what is the best way to enter or exit spread trades?
Andy: I think there is no “best way” to enter or exit spread trades, there is only “your way”. Let me explain:
I personally prefer to enter all my spread trades at the Close. I don’t like to watch my spreads during the day, so I focus only on the Close. When I trade open outcry markets I place a Market on Close (MOC) order during the day. When I trade electronic markets, I “simulate” the Market on Close order by legging in during the last 3 minutes of the trading day. I always focus on the open outcry hours even when I trade an electronic contract.
Most buying and selling is at the Open and at the Close, especially in thin markets. When you use a limit order you can enter anytime you want, but you might have the problem of not getting filled.
If you are a trader from Australia, for example, you would find it very inconvenient to enter around the Close because it would mean you would have to stay up all night, or you would have to give the responsibility to your broker. If entering at the Close is not comfortable for you, just enter the next day. Enter around the Open if you want (I recommend waiting some time at the Open until the markets slow down), or enter the next day via Market on Close order.
In the long run it doesn’t matter. It is more important that you feel comfortable with the timing of your entry and exit.
Online Spread Training for YOU
with professional Spread Trader Andy Jordan
Spread Trading is one of the most consistently reliable, potentially profitable, and safest ways to achieve real success in trading.
If you have previously looked into spread trading, but you have not been able to figure exactly how to use spread trading to be more consistently profitable, then this is what we have for you:
This is YOUR chance to LEARN FROM, to TRADE WITH, and to INTERACT ONLINE (from your private office desk or couch), ONE-ON-ONE with a professional and knowledgeable spread trader. During one whole trading week YOU will get all the individual attention you need to get a better understanding of spread trading itself, and how to spread trade the markets for profit. You will learn to select the right markets and the right spreads.
Your Mentor, Andy Jordan, will show you distinct ways to dig out high probability spreads. You will develop a spread trading plan including money management, risk management, and trade management.
There is so much for you to receive and learn during this whole week that is tailored towards YOUR own needs.
This one week online Spread Training is a great value at $997. The training experience, the professional help including all the tools and information you will get, are the best investment you can make towards becoming a proficient, knowledgable, and more profitable spread trading expert.
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Disclaimer:
The Commodity Futures Trading Commission has asked us to advise you that trading spreads or outright futures is complex and carries a high degree of risk. While there is opportunity for incredible wealth building, there is also the risk of losing even more than you invested. Of course, that's not unlike most other businesses. But informed traders are the best traders!