Online Finance Academy – Yield Curve – Spread Trading Strategies

Ask any established professional trader what trading style can provide the longest, most consistently profitable career and they will likely tell you it is in spreading. This is particularly true nowadays as momentum style day trading becomes increasingly dominated by high frequency trading algorithms. Spreading is a style of trading where one does not require expensive news feeds or the fastest connections to exchanges. It is a form of trading that allows one to manage their trades more passively. As a result, the stress factors that often cause day traders to lose money are less present with spreading.Spread trading involves making a wager on the change in price between two similar futures or options contracts, rather than betting on outright price direction. This style of trading tends to have far more reliable patterns of ebb and flow and requires far less margin. This means traders should find it easier to follow a risk management strategy, and trade larger with less risk. 

This course will focus on futures in the US treasury market, which is the most active bond market in the world. What you learn in this course can be applied to other markets as well, including: European, British, Canadian and Japanese treasury markets, as well as grain futures and stock index futures. You will learn specific strategies for trading intra-market spreads as well as the macro-fundamental knowledge required to make well-reasoned trading decisions. A knowledge of reading charts or using technical indicators is unnecessary. Instead, you will learn how to read a spread matrix, execute a trade on a popular platform and understand why and when to exit a trade.

Taught by a career spreader with over 40 years in the business as a trader and trainer, this course will give you a solid foundation to building your career as a trader.

Key ‘takeaways’ and topics to be covered in this course: 

Module 1. Rudiments of the Yield Curve 

• What is the yield curve?
• Learn the various shapes of the yield curve and what they indicate.
• What are the factors that make the curve flatten or steepen?
• How long do these trends of flattening / steepening typical last?

​Module 2. Monetary and Fiscal Policy 

• What is monetary and fiscal policy?
• Learn the impact of monetary and fiscal policy on the yield curve.
• Learn about Central Banks and their influence on the curve.
• Learn how to use Central Bank guidance to shape your trading strategies.
• Learn how treasury markets respond to inflation and deflation.
• Which economic indicators will influence the yield curve and make certain contracts move the most.

Module 3. Auctions and Other Factors That Impact Supply/Demand

• We will discuss the mechanics of treasury auctions and refunding; how examine and understand the results.
• Learn how the Federal Reserve can impact supply and demand.
• Learn the impact of non-U.S. central banks, financial institutions, and investors on treasuries.

Module 4. Market Expectations and How They Move Markets 

• Learn how market expectations influence market responses.
• Using variance and standard deviation to gauge impact of economic releases on treasury market spreads?
• Symmetrical and asymmetrical market responses.

Module 5. Geopolitics

• Learn how political decisions by sovereign nations impact the yield curve.
• Flight to quality (risk off) can be triggered by a variety of factors (i.e. fiscal and monetary policies).
• Learn how geopolitics can lead to risk-on and risk-off reactions in the marketplace.
• What spread strategies should we implement in risk on / risk off scenarios?

Module 6. Calendar Spreads

• How does quarterly rollover in treasuries create profit opportunity?
• Learn how to calculate the value of calendar spreads.
• Learn about the use of ratios with calendar spreads.
• We will discuss trade execution for calendar spreads.

Module 7. Trade Execution / Wrap-up

• Watch and learn how your instructor places and executes trades on the trading platform.
• Learn the rationale behind long term and short term trading strategies.
• We will examine your practice trades and suggest a trading plan that best suits you.