Trading inverse etf's against eachother

frstwrldprblm · Post by **frstwrldprblm** » Sun Oct 02, 2011 1:29 am

Hello,

Is this something done? Is it a fools task?

Assuming a cleaned time series (backing out splits etc) using the return spreads to generate trade signals.

I suppose not much different than a sort of relative strength type of punt, but just curious.

Thanks for any input.

danko · Post by **danko** » Sun Oct 02, 2011 11:55 pm

Nope, you're the first one to think of it.

Baltazar · Post by **Baltazar** » Mon Oct 03, 2011 8:52 am

if you mean make market in one etf based on another one (like quote short dax etf based on dax etf), good luck with that.

you just need to be the fastest out there and the one with the lowest clearing/trading costs. And with these two conditions you are not even sure to make enough money.

if you mean spread trading style, there will be no trade signal, it will be extremely well in line. Beware if you look at last traded prices as one leg might be illiquid generating fake signals.

frstwrldprblm · Post by **frstwrldprblm** » Mon Oct 03, 2011 5:41 pm

the general thesis (at the moment) is just to trade the return spread as an indicator on the market (3m return for example). it is extremey basic and I am just on the surface of it, but just thought to ask.

i know this is not something genius, thats not the idea.

Baltazar · Post by **Baltazar** » Tue Oct 04, 2011 8:50 am

you are not very specific.

"the return spread" of what?

short dax etf versus long dax etf? or short dax etf versus short esx etf?

in both cases each market maker will make sure etf trades at fair value. In the first case this means I don't think you will ever trade and in the second you are just doing a dax/esx spread with less favorable instruments (compared to futures).

well in the second case what i say is true if you keep it intraday, if you go longer that's not equivalent to trading it with futures.