Wednesday, 03 July 2019
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“There are old traders. There are bold traders, but there are very few old and bold traders” (Ed Seykota, famous commodity trader)
If the purpose is not sourcing GOs, but trying to benefit from market movements, a trader can take positions to benefit from regular patterns seen between vintages.
If the current year -1 is expected to drop compared to the current year, a spread strategy might be interesting.
In a standard spread strategy, the trader simultaneously sells one product and buys another one. When taking on a spread, the trader is not taking a bet on the direction of the market, but a bet that the relationship between to products will change. A spread is a common strategy used by experienced traders. Taking on outright positions (long or short), is usually considered a riskier strategy.
As an illustr...