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Yesterday's Risk Spread Has Now Closed
The magical RISK (commodities, rates, carry FX)-ES spread trade which we pointed out yesterday as soon as it blew out, providing a 7.5 ES equivalent pick up, suggesting a compression trade at this divergence level usually leads to a happy ending, has just closed (although in a classic reminder why trading just one leg of the spread can lead to hazardous conclusions - remember: this is a pair trade). Oddly, today RISK has notably outperformed the ES for three main reasons: the outperformance of crude, the plunge in the JPY, and the big move in the butterfly as a result of two consecutive abysmal bond trades. On an intraday indexed basis, the spread is actually favoring going long ES here while shorting the entire risk basket. The bad thing for the IEA and the administration is that today's move in crude higher is more than offsetting the jump in stocks (which intuitively should now be moving in opposite directions as Brian Sack has gotten his marching orders to kill oil and send stocks back to 1350).
Yesterday opening spread:
And closing.
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Prolly one of the most interesting day-by-day basis posts.
Thanks.
+1
+1 The consistency of reporting is helpful and the tidbitd TD throws are approaching a 100% hit rate. Put on UCO after the SPR .66 US daily consump release joke.
Courtesy of WTI and 10s. Love these posts.
Final session of Greek Parliament debate begins at 930am.
So the ES is now leading the risk basket? Bears are becoming extinct.
IMHO Greece is the "turning point", if they let the "austerity package" go, as in "eat it, then we can be sure this will go on for another 2-3 years, see Spain, Italy and Portugal! Stop Loss on all my puts/shorts going into tomorrow! Not going long, not staying in the "markets" any longer! Just physical PMs!
Yeah, something like that. I mean, you'd be crazy to go long equities in this enviroment.
I'm thinking its almost time to go short. Caught a nice short at the end of the day yesterday.
Shorting VXX doesn't count
Referencing the ES not VXX.
I like them better when it collapses due to stocks dropping
Volume looks to be a little over half the average at this point in the day???
Did not surprise me to see it close in AH/PM. Do not think that ES will push ahead of RISK again this week like it did yesterday. Everything trading in tandem till the EOQ.
Short-term VWAP is a freaking joke. Waaay over priced.
VWAP since Osama ben Laden breaking news 1314
Vwap since 1st jan 2011 1310
they want to fix it, then the war will begin.
Well, dumping oil is working well. Sell it at 110, then buy it back at 120 to replenish. Good job Obama, as usual.
I got long ES on Friday, I am not sure if this run will last one more day, but i hope so
If you're smart, you'd put on tight stops. Once Greece passes the austerity vote, you catch the ride to the upside. Should Greece blowup into violent protests and they storm parliament, you're protected.
When is the greek vote going to occur? THursday in the am?
the market can rally to infinity without the financials bitchez!
Why would anyone want to own US stocks at these nosebleed levels when their profits are soley determined by stimulus money and artificial growth (accounting fraud)?
in my chart we are at the top of the up channel, don't know if we wll have a break out. I expect so, mayb another down day? I also figure the big boys will end their repor 105 soon which shall free up money to buy risky assets. we will have to go back to the old days where some profits will have to be taken to drive up the market I hope. so based on hourly macd, speed channel, rsi I made myself more market neutral at about 15:30 this afternoon again after closing shorts monday morning adn buying long. I closed thursday, rebought and of day thursday shorts.
Looking for 1300 spurt on close?
Can someone help me deconstruct this... Specifically the (commodities, rates, carry FX) Leg. To put this trade on do you have to build the risk basket with individual trades? I understand trading the compression. Just do not know how to build the NON-ES leg. Thank you for your patience.
TD has previously specified the exact composition. If one were to attempt to play it exactly, it would be done via individual instruments, however I think the ULE (and recently less likely) EUO pair would be sufficient for you to play along. You will need scale or leverage to make a decent buck.
Is this a month-end ramp up? I understand that technically stocks are supposed to go up, but QE2 is ending and I think we'll see soft earnings numbers by US companies. We've already had two major ones (that I know of) here in Europe this week, today it was Tomtom (an AEX index member) down 27% on a profit warning.
Do you guys normalize the data to get the risk basket to line up with the ESU1 or do you let it float. I replicated the index in my bloomberg but have to reduce the risk basket by a divisor to get it to the same numeric level as the ESU1 index. Do you adjust that divisor daily?
Thanks.
pretty sure default is to normalize. anyway, i'm on defaults and though i created a basket i prefer mapping es, wti, eurusd, and the 10yr yield individually. different time horizons create different spreads though, which is also useful.