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Spread
Scan Issue: November 07, 2007 - Volume 169
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Today we consider an interest rates spread: long December '07 30Yr T- Bonds and short December '07 10Yr T-Notes (USZ7 – TYZ7). After testing the level of around 1^16 in June, August, September and October 2007, the spread is trading close to the upper bound of its trading range (trading range between 1^16 and 3^00). The seasonal time window (app. 11/03 – 12/12) indicates an entry into the spread right now (i.e. MOC today). But also an entry after the break out of the high of the trading range might be a good trading idea.
Traders may want to enter the spread MOC today. Please check with your broker for margin requirements. Suggested risk is $600. Initial projected objective is $600, then higher. Basis is seasonal (app. 11/03 – 12/12) and a Ross Hook in a trading range.
On October 14 we told subscribers of our professional daily spreads & position trading newsletter Traders Notebook, "Consider entering an inter-market meats spread 400*LCG8 – 500*FCX7 at -$17,800. Initial 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. 9/18 – 10/25) and a break out of a trading range."
Here's how we suggested managing this trade:
09/20 Suggest entering MOC tomorrow.
09/21 In?
09/26 Suggest moving stop to -$17,930.
10/12 Suggest moving stop to -$17,700.
10/15 Suggest moving stop to -$17,440.
10/17 Suggest moving stop to -$17,160.
10/19 Suggest moving stop to -$16,780.
10/23 Suggest moving stop to -$16,660.
10/26 Suggest moving stop to -$16,340.
10/29 Suggest moving stop to -$16,250.
10/30 Suggest moving stop to -$16,220.
10/31 Suggest moving stop to -$15,900.
11/01 Suggest moving stop to -$15,860.
11/02 Suggest moving stop to -$15,800.
11/05 November FC is getting very thin because of the roll over into January. Suggest exiting tomorrow (or the next few days).
11/06 Out?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, as far as I can see you are recommending many more meats spreads this year then any other market. Why do you prefer the meats markets?"
Andy: Actually I do not have any preferences. I trade what I see. I look at a chart, and if I like what I see I trade it, without having any specific opinion about the market. I don’t care if I trade a grain spread or a meats spread as long as I see on the chart what I want to see. Most of the meats spreads have worked very well so far, but I do not have any guarantee it will continue. Circumstances can change from one week to the next, and maybe the grain spreads will become more attractive in 2008. We will see.
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Be aware - Trading in commodities will become more important than trading in financial instruments...
The world is entering a new era of trading where trading in commodities will become more important than trading in financial instruments. Already copper, silver, gold, grains, natural resources have reached new all-time highs. Let’s face it, the world of trading does not consist of trading only stock indexes, currencies, and debt instruments. The shaky global financial situation has come near to melt-down a couple of times in the last two years. While stocks are up in double-digit numbers, commodities are up in triple-digit numbers, and the safest way to trade in commodities is to trade spreads.
Spreads offer you the best and most efficient use of your trading capital. You will regularly find spreads that are trading for one-tenth the margin required to trade in any other market. That means you can trade 10 spreads using the same amount of capital you would have to put up to trade one futures contract.
The number-one enemy of every trader is that of "stop running." Spreads completely avoid stop running. There are no stops, and so stop running cannot occur. You can spread just about anything imaginable if you understand how spreading works.
You do not have to travel far to learn spreads; you can learn comfortably and conveniently online from THE professional spread trader: Joe Ross. You can watch the seminar from your computer desk or from your laptop on your couch. You can start learning TODAY! Follow this link to our website at Trading Educators, Inc. to find out more about the world's only complete Spread Trading Seminar — now online.
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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!