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Granted, I'm new to spread trading, but it's amazing what even beginners
can find on the web with enough persistence.
Although not well known to the general public, commercials have long
been trading December Santas vs. April Bunnies. At the end of December,
the desirable position would be to sell Dec. 99 Santas and buy April 00
Bunnies
Over the May to August period this spread generally trades at about even
money with a slight tendency for the Bunnies to go to a premium over
Santas depending on long term weather prognostications. Starting in
September, sometime after Labor Day, the Santas gain on the Bunnies,
going to a sharp premium at the end of November. Aggressive traders
have been Long the Santas - Short the Bunnies from about Halloween.
After the Christmas Holiday, Santas have a marked, reliable tendency to
sell off vs. Bunnies. The attached chart shows the progress of the
spread to date. Note the trend line. While I would normally recommend
waiting for evidence of genuine downward momentum, astute traders will
enter this spread at the first decisive break lower.
The CBOT does not recognize this spread so you will have to margin each
contract separately. Consult your broker. Bear in mind that this is a
so-called "money spread" because Bunnies are traded in eggs per basket
while Santas are calculated using presents per sleigh.
An interesting and perhaps not entirely unrelated parallel may be found
in the well known Latkes vs. Hammantaschen spread which usually peaks
somewhat earlier in December with the Latkes at a huge premium over the
Hammantaschen.
Philip
Attachment Converted: "f:\eudora\attach\Santas vs.gif"
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