NOB Spreads
Today I had a good conversation with a long time trading friend of mine. We were talking about the NOB Spread and how to best trade it. There are probably a million ways, but one that deserves some attention is to use it as a bird dog for other individual markets.
Remember that the NOB is a spread (one side long - one side short) between the 30 Year Bond and the 10 Year note. The Bond is the fast leg of the spread, so whichever way it decides to go determines the direction of the spread. The combination of the two buffers the market swings so that it doesn't react so abruptly as an individual contract would. Because of that, we consider it to be a more reliable indicator of interest rate trends.
What we discussed was the idea of using the NOB to pick the trend direction but actually making the trade using a 5 Year note. The trend in the NOB is best determined in our opinion by following the track of combined moving averages. One can trade the 2 Year, 5 Year or 10 Year note in the direction of the NOB and in that way adapt the level of risk to their own personality. With the advent of electronic markets it is now possible to trade almost around the clock with stops.
Call me if this interests you but needs more explanation.
One of the new services we are offering traders at Dillon Gage is a “clients only” web page where we put out trade ideas each day that will identify the market, the entry point and the method of entry. It will also give the trader a suggestion for how much the risk is estimated to be and as the trade progresses, where an objective could be established. If one of the trading ideas seems appealing, the client can make a quick phone call for a more complete explanation and order placement.
Call me at 1-800-375-4243 to learn more! Phil
There is a risk of loss in trading futures and options. Past performance is not indicative of future results. Stops become market orders once the price is touched or violated; therefore, stops do not guarantee a fill at the price on the ticket. The information and data on this site was obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed on this site will be the full responsibility of the person authorizing such transaction.