commodity spread trading - …€¦ · unique know-how of tradeandfinance.eu • new approach to...
TRANSCRIPT
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discretionary commodity trading in different and
profitable way
COMMODITY SPREAD TRADING
Romana Křížová CEO, TradeandFinance.eu, s.r.o.
What is Spread?
• Often used term
• Used in different contexts – represents different facts
• Confusion in interpretations and use of the term
• Spread = difference in price between two price values
– Spread between BID and ASK
– Spreads in options trading
– Commodity spreads
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Spread between BID and ASK
Difference between the buying and selling price of a commodity or security
• contract of Corn with expiration in December 2013
− BID price - $426.75
− ASK price - $427
− Spread between both price values is $427 – $426.75 =$0.25
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• Spread is calculated from price difference between a long and short positions of futures contracts
• Works on seasonality basis – increases winning probability – enables to predict increase or decline of price difference
• Price difference between long and short positions is displayed on spread charts
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Commodity Spreads
Difference between Outright and Spread
• Outright – speculation on price change of a particular commodity
• Spread – speculation on price change between value of two trading positions
• Spread is a combination of two outrights = so called „legs“ of spread
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Spread Value Spread value = price of long position minus price of short position
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14.1.2013 4.4.2013
Wheat CBOT September 13 784,75 707,5
Wheat KCBT September 13 851,25 740
Spread -66,5 -32,5
Profit in Spread Trading
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commodity A
commodity B
LONG position = long leg
BUY for 300
SHORT position = short leg
SELL for 200
Price of commodity A grows – price of commodity B declines
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commodity A
commodity B
LONG position = long leg
BUY for 300
SHORT position = short leg
SELL for 200
Prices of commodities A and B decline price of commodity B declines faster
Profit in Spread Trading
Spread chart with historical patterns
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• Enter the LONG position in the area of seasonal LOW
What Commodities/Futures to Trade
• Grains – Corn, Wheat (CBOT i KCBT), Soya, Soybean Meal, Soybean Oil
• Meal – Live Cattle, Lean Hogs, Feeder Cattle
• Energy – Heating Oil, Natural Gas, Gasoline, Crude Oil
• Currency – EUR, USD, GBP, JYP, CHF
• Financials – US Treasury Bonds, T-Notes 10Y, T-Notes 5Y
• Metals – Gold, Silver, Copper
• Softs – Cocoa, Coffee, Cotton, Orange Juice – very carefully
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ADVANTAGES OF COMMODITY
SPREAD TRADING
Advantages of Spread Trading
• Lower volatility = lower SL = lower risk – The lowest volatility applies to interdelivery spreads
(the same commodity, different expiration months)
– Enables to trade with lower trading capital
• Low margins
• Seasonality
• Is not time consuming – positions check before exchange closing hours
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Volatility of Outright
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Daily price move
Volatility of Spread
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Daily price move
Margin - outright
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http://www.cmegroup.com/trading/agricultural/grain-and-oilseed/corn_performance_bonds.html
Margin - spread
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http://www.cmegroup.com/trading/agricultural/grain-and-oilseed/corn_performance_bonds.html?marginsTab=INTRA
Seasonality of Commodity Spreads
• Spread trading is based on seasonality
• Seasonality is a nature of the underlying asset - commodity
• Easier searching for potentially winning trades
• Searching for trading opportunities by correlation of current year spread with seasonal tendency and historical patterns of 5, 10, 15 and 20 years
• The markets most correlating with long term patterns have the highest winning potential
• Spread position entry on seasonal HIGHs and LOWs
• Tool for searching and analysing the trading opportunities - SeasonAlgo
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Seasonality of Commodity Spreads
Enter the LONG position in the area of seasonal LOW
Advantages of Spread Trading
• Trading based on hedging principles • Lower impact of fundamentals • Strict regulation – strong role of clearing centres • Seasonality • High liquidity • Low margins • Lower volatility than outrights = lower risk • Suitable trading approach for beginner traders • High winning rate of trades • Increase of trading capital in tens of percent per year
What is Needed for Spread Trading?
• Trading account at a broker which enables trading COMBO spread positions on lower margin – Interactive Brokers
• Trading account of at least $10 000
• Online platform SeasonAlgo – from $33/month
Spreads on TradeandFinance.eu
• Articles
– http://www.tradeandfinance.eu/en/kategorie/posts/commodity-spreads/
• Videos
– http://www.tradeandfinance.eu/en/videos/?catid=komoditni-spready
Unique know-how of TradeandFinance.eu
• New approach to commodity spread trading with use of the latest analytical tools
• Different ways of teaching commodity spread trading: – based on technical analysis, or – without technical analysis by optimised trading window, or – combination of both approaches.
• Profound knowledge of SeasonAlgo – TradeandFinance.eu is worlwide the only trainer authprised by the SeasonAlgo developers
• Unique complex training of searching, filtering, detailed analysis and optimisation of spread strategies
• Training in use of statistic methods and Walk Forward Analysis
• Unique training in use of SeasonAlgo for application of effective risk management
Spread Trading Courses
• Commodity Spread Trading • For intermediate traders • 1 training day (= 6 hours)
• Using the SeasonAlgo Platform • Builds upon spread trading course and enhances the trading technique by
teaching how to search and analyse spreads with high winning potential • 1 training day (= 6 hours) • Also as online course
• Workshop of Spread Trading with the Advanced Bactester of SeasonAlgo • Practical workshop, practicing of spread trading technique, advanced
functions of SeasonAlgo, working with the Advanced Bactester and Walk Forward Analysis, advanced risk management and position sizing
• 4 hours
• Individual training by individual requirements
Bonuses for Course Participants
• 30 days trial on all markets and 10% discount on SeasonAlgo – not possible to cumulate with previously provided trials and discounts
• 14 days trial and 40% discount on Gecko Software - http://goo.gl/tI8UJM
• 31 days trial and up to 10% discount on Sierra Chart
• 50% discount on online course Using the SeasonAlgo Platform
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Disclaimer
Any information provided by TradeandFinance.eu, s.r.o. is intended solely for educational purposes related to exchange trading and in no case serves as a particular investment or trading advice. In case there are particular
financial instruments, trading strategies, underlying assets or derivates mentioned on www.treadeandfinance.eu, training courses, educational materials, downloads, presentations, videos, webinars or online courses, it is always
and solely for educational purposes. TradeandFinance.eu, s.r.o., authors of training courses, educational materials, articles, documents and videos or lecturers are in no case responsible for particular trading decisions of individual
traders, users of our products or services or participants of our training courses.
INVESTING AND TRADING WITH FINANCIAL INSTRUMENTS AND COMMODITIES IN PARTICULAR INVOLVES A HIGH RISK. A DECISION TO TRADE AT EXCHANGE IS A FULL RESPONSIBILITY OF EACH INDIVIDUAL AND ONLY HE/SHE
HIMSELF/HERSELF IS FULLY RESPONSIBLE FOR HIS/HER OWN DECISIONS.
Never enter any trade whose nature and rules you do not fully understand. The risk of loss in trading commodities can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your
financial condition. Moreover, results of historical trades are no guarantee of future trading profits.
All data presented by TradeandFinance.eu, s.r.o. which were taken from other sources, are given in good faith that provided information is correct and up-to-date. However, please always verify up-to-dateness of provided
information at source sites of relevant exchanges, brokers or other sources of information used. TradeandFinance.eu, s.r.o. authors of training courses, educational materials, articles, documents and videos or
lecturers bear no responsibility for their change, accuracy or up-to-dateness
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