Spread Trading - Strategy & Calculation

[balab]

This strategy is pretty good, but of late the spread is off the charts. I have attached my own analysis and possible trades for mini and regular lead-zinc including Jan contracts. Anyone willing to stake a trade on today's closing spread of 6.3? I am pretty sure it will hit 5 or even 4 by expiry. Anybody?

 

[tnandkumar]

hi blab sir,
thanks for ur wonderful exel sheet with colour,i want to start lead-zinc spread stratergy with you.but sir i have small doubts,i hope u will take time to reply.sir, 1. you took bear spread position , even when values were not according to rule spread gap < bear spread (eg:- 23rd nov and 07th dec).
2. according to the post we were holding in bull spread even when the spread gap < bull spread.
if my doubts are silly please do excuse me, i just want to learn ,before putting real money.if possible please give ur mail id or mail me

[email protected]
09246676197

 

[balab]

I've been researching about this spread strategy; as we all know nothing comes without its own risks. The spread hit 7 at one point so I was wondering what is the maximum it can go. Check the pdf below; as per historical chart spread has even hit 22 in Sep 2010! So any position you take you have to keep in view the risks and with a strict spread stoploss. The odds are greater for it to go into positive territory rather than negative; a possible low risk strategy would be to only invest when spread is negative (lowest low=9.45, highest high=22)

http://www.karvycomtrade.com/downloads/karvySpecialReports/karvysSpecialReports_20100325185141.pdf

hi blab sir,
thanks for ur wonderful exel sheet with colour,i want to start lead-zinc spread stratergy with you.but sir i have small doubts,i hope u will take time to reply.sir, 1. you took bear spread position , even when values were not according to rule spread gap < bear spread (eg:- 23rd nov and 07th dec).
2. according to the post we were holding in bull spread even when the spread gap < bull spread.
if my doubts are silly please do excuse me, i just want to learn ,before putting real money.if possible please give ur mail id or mail me

[email protected]
09246676197

 

[.Pride.]

Hi,

I have just one doubt.

All the sample calculations that are given are based on the "Close Price".
So how would I place my initial entry? I mean if I wait for market to close to see if the close price is suitable for spread trading, I will be able to place my order only on next day open. This open price may be substantially different than the previous close price resulting in a different spread than what was there yesterday.

So please tell me how and when to initiate the actual spread trade.

I hope I have been able to clearly communicate my doubt to you guys.

Thanks

 

[balab]

You may calculate the spread in realtime anytime during the day by plugging in the values into excel and then take a decision.
It has not varied significantly intraday in the past few days.

 

[sumeetsj]

Now as we see there is a run up in both Lead and Zinc prices since past 2-3 days, we might be able to take a spread position. Obviously waiting as expiry is around the corner.

Please keep the thread alive with inputs which will enable us to take a position.

Happy New Year to all in advance :thumb:

Thanks and Regards,

Sumeet

 

[mehtaka]

This strategy is pretty good, but of late the spread is off the charts. I have attached my own analysis and possible trades for mini and regular lead-zinc including Jan contracts. Anyone willing to stake a trade on today's closing spread of 6.3? I am pretty sure it will hit 5 or even 4 by expiry. Anybody?

Hello balab,
I agree with you that zinc-lead spread has been not good, though it looks attractive on current levels (spread of 9 rs almost).
Also nice work with the spread sheet. Have couple of queries.
1) I have the spread sheet, which iguru had posted, and have been updating the same since than. But theres a difference in datas in your sheet and mine. (no idea abt who is right). As the zinc and lead both has monthly expiry, i take on the monthly datas.

2) In your sheet i can see, at time, both the position open.i.e bull and bear spread. how that could be.

i will try to upload mine sheet as well.

 

[sumeetsj]

Hello balab,
I agree with you that zinc-lead spread has been not good, though it looks attractive on current levels (spread of 9 rs almost).
Also nice work with the spread sheet. Have couple of queries.
1) I have the spread sheet, which iguru had posted, and have been updating the same since than. But theres a difference in datas in your sheet and mine. (no idea abt who is right). As the zinc and lead both has monthly expiry, i take on the monthly datas.

2) In your sheet i can see, at time, both the position open.i.e bull and bear spread. how that could be.

i will try to upload mine sheet as well.

Hi Mehataka,

The difference in data is because of calculations in excel upto some decimal places. Also the start of data range from which the Avg and Std Dev have been taken. I was also bugged initially when i compared. But after a lot of calculations found out these things.
Have studied your sheet as well. Its perfectly fine.

And in case of Balab's sheet is it some time where you have booked and taken reverse positions ?

Thats possible i think.

Also i feel its time to take a bull spread position. Maybe i will do a paper trade this time or jump only if the spread widens in todays trading session.

Pls comment.

Thanks.

 

[mehtaka]

Hi Mehataka,

The difference in data is because of calculations in excel upto some decimal places. Also the start of data range from which the Avg and Std Dev have been taken. I was also bugged initially when i compared. But after a lot of calculations found out these things.
Have studied your sheet as well. Its perfectly fine.

And in case of Balab's sheet is it some time where you have booked and taken reverse positions ?

Thats possible i think.

Also i feel its time to take a bull spread position. Maybe i will do a paper trade this time or jump only if the spread widens in todays trading session.

Pls comment.

Thanks.

Hello Sumeet,
Thanks for your prompt reply...my query abt the difference in datas was with the closing prices of lead and zinc which balb and I have consider.
If your see it, you will find the difference in that. Rest its all calculation which will be no different.

 

[sumeetsj]

I plan to take a trade now... (Thursday Jan 6' 2011, 06.45 pm)

Short Lead 31st Jan Futs at 121.60
Long Zinc 31st Jan Futs at 111.50

Its on paper this time for me.
Am confident though that guys can enter real trades on these levels. Strictly these levels. I would strictly do my first couple of trades on paper before getting in the ring.

Lets see what happens.

Good luck.