YM Futures Calendar Spread Trade

On April 30, 2009 I put on a YM Futures Premium Trade by Shorting the June contract and going Long the September Contract.

April 30, 2009- YM Futures Contract- Short June, Long September.

June 1, 2009- YM Futures Contract- Short June, Long September.
As you can see the spread has not tightened at all for the last month. The Trade has been -$30 since I put it on because of the initial cost of the bid/ask spread. The June Contract expires June 19.2009. The next two weeks should tell whether there is any merit to this trade at all.

YM Futures Calendar Spread Trade

On April 30, 2009 I put on a YM Futures Premium Trade by Shorting the June contract and going Long the September Contract.

April 30, 2009- YM Futures Contract- Short June, Long September.

June 1, 2009- YM Futures Contract- Short June, Long September.
As you can see the spread has not tightened at all for the last month. The Trade has been -$30 since I put it on because of the initial cost of the bid/ask spread. The June Contract expires June 19.2009. The next two weeks should tell whether there is any merit to this trade at all.

CNBC Bullishness and Dow/Futures premium

CNBC is cheerleading the Dow to 10,000 this summer. Nevermind its the last day of April (window dressing) and we have the "Sell in May and go away" theme starting,,,Tomorrow.



It's interesting to note the Premium/Discount in the spread between the Dow Industrial Cash market and the Futures market. The September YM contract is at a 100 pt discount to the Dow cash currently.

Lets see what happens to this Futures Premium Trade in the next month, I expect the two numbers to get closer together, making me money in the process.
Trade setup-
YM Futures Contract- Short June, Long September.

CNBC Bullishness and Dow/Futures premium

CNBC is cheerleading the Dow to 10,000 this summer. Nevermind its the last day of April (window dressing) and we have the "Sell in May and go away" theme starting,,,Tomorrow.



It's interesting to note the Premium/Discount in the spread between the Dow Industrial Cash market and the Futures market. The September YM contract is at a 100 pt discount to the Dow cash currently.

Lets see what happens to this Futures Premium Trade in the next month, I expect the two numbers to get closer together, making me money in the process.
Trade setup-
YM Futures Contract- Short June, Long September.

Pair Trading

Trading is hard.



Inverse relationships between XLE and XLF

100% LONG until Years End

The Media has found the people to Blame at Bear Sterns. Last time we played the blame game for the Stock Markets problems was January 21, I remember this day well....
Whenever we play the Blame Game, THE MARKET RALLIES HARD.
We also got strong selling in commodity related,,,everything. Makes me feel a little better;however, Crude Oil is still in its 10 day trading range even with todays 5 dollar selloff.
I agree with what Stewie sees in the markets here. Depending how the market shapes up here, I'm prepared to start trading Airlines Long, Ag's Short, Crude Short, Long Financials, Long Transports. The bounce in the airlines today still may be premature to call a bottom, I was kinda-of waiting until August to see if any bankruptcies in the airlines were going to be announced, but now may be the time to start trading this inverse pair relationship.

May 24 Trade Summary $2,034

Priorities- That is what I need to work on.
I traded the first 4 hours, and now I'm going to work. When we have a selloff like we did today, you have to be trading the contract you know. Unfortunately my attention and assets were wrapped up in ZN and AAPL when the selloff started, so I had to manage those trades, and I was unable to trade ER2 during the selloff, which as a result caused me to lose a lot of potentially easy money to be made. Overall, I'm satistfied that I got a good trade in on ZN, considering I lack experience trading it, I did exit too soon though. (I bought bonds ahead of the selloff, unfortunantely I forgot to short equities at the top because most of my attention was spent on watching ZN and ZF.) I did get a few good scalps on YM, and I'm actually surprised that I traded so many contracts on YM and ER2. I had a downside target of 828 on ER2 today, I feel bad that I didn't make more money than I did considering the large range we had today. Overall, I need to stop wasting my time with AAPL, and I need to just work on ER2 and YM.

P/L= $2,034

Market observations-
Bond/stock inverse trade occured today, marking what looks to be the start of increased volatility for the markets and a possible correction for equities.(However we have memorial day coming up so people may be just be unloading positions before the 3 day weekend). ER2 caught up to YM today in terms where they trade relative to each other. I was actually buying YM and shorting ER2 today, the opposite of yesterday. It seems like everyone caught on to the buy small caps and short big caps pair trade by Tuesday. I looked at is a more of a blowoff top, where large short positions were being accumulated in small caps and ER2. Rick Santelli said last month that he expected SP500 to test the old highs before a market correction, he looks to be correct so far. Bob Pisani and most of the broadcasters at CNBC always tell you the news 1-2 days after its happened. Bob Pisani was saying yesterday, "Record short interest", "market is likely to continue higher and squeeze the shorts".What about all of last month, shorts were squeezed badly on all of the "good earnings news" like AMZN. Guess what happened, shorts were squeezed, covered near the top, we consolidated near the top for awhile, smart money came in an added shorts to all those "good earnings companies", and now we have a nice setup for a slow decline into the summertime. Time to sell some calendar calls.

March 21 Trade Summary

I decided to scalp the first hour and now I'm going to sit back and watch. My scalping skills kinda sucked, but I still came away with some profit with the small opening range on ER2. If I would have held my short on YM from that weak short covering rally at the close yesterday I would have made a profit. I'm not too mad about that though because I hate having to stress about holding positions overnight, and If I wanted to I could have shorted at the open to hold true to my confictions.

I think the market is going to go down. The Yen and bonds are on support, and the stock indices have overhead resistance. The best trade right now is probably buying vix calls. I honestly don't think there is anything new that Bernanke could say that the smart money isn't already aware of. I'm going to try to do an inverse pair strategy on the simulator by going long JPY and long ER2 as a hedge.

New correlation stuff

I found another website where you can run correlation between stocks and ETF's at www.spdrindex.com/correlation. I need to focus more on leading sectors as my leading indicators. I think I'm going to start using Ben the S&P broadcaster to help with my trading. I'm going to see which index is leading and lagging. I believe the Nasdaq has been the leading indicator to where things are headed. The Techs haven't been getting beaten as badly as the other sectors probably because they are already beat down pretty hard. I notice that there was good volume on the moves to the upside today when looking at the indices. Also, the VIX is at 23.81. Great volatility for day trading. I just need to practice and get better. I'm looking at the VIX and it is the smoothest looking chart I've ever seen, with nothing but trianliar patterns.

The question is when this trend line will break. Stocks like TIE and HANS are getting beat down hard, rightfully so. Just when you want to buy something that seems like it will keep going up forever it normally is at a peak and you can suffer some serious loses if you don't use stops.

The VIX today ended up 13.6% at 23.81. The long term trend line on the VIX has been broken. We are in BEAR COUNTRY!


VIX to $30?

Pairs- Market Topology

Pairs trading works like this. You have 2 highly correlated pairs in which you want to follow. It doesn't matter which stocks moves first in a particular direction, the key is to get into the laggard stock which will eventually catch up to the leader. Also, you have anti-correlated pairs, in which case you want to short when your stock goes up and vice versa. Here is a great example of 2 pairs(CHK and ECA) and it has 2 corresponding anti-correlated pairs(AMR and CAL).


Here's a Pair:


Depending on what type of trader you are, this strategy can be used for swing and day trading. Also, a good website to use to find pairs and anti-correlated pairs is www.market-topology.com.