Learn our Commodity Spreads Program

Want to be a Successful Trader?

Successful Traders like to see where the edge is and seize it every time it appears! Our Commodity Spreads Program was developed with this in mind, by taking advantage of one of the very few true edges we see in the market: The Goldman Roll and Long Only Commodity Funds. Seize the edge, sign up for our Commodity Spreads Program and trade your first 60 days complimentary!

BACKGROUND

Traders are always searching for strategies that can produce consistent profits without crushing draw downs. Trend following systems have produced below average returns for three years running as evidenced by all major Commodity Trading Advisor (CTA) indices. Day trading, which is most popular in stock indices, has also suffered as a result of several years of low volatility and choppy markets. Option writers in stock indices have done well in recent years but history shows us that when the inevitable burst of high volatility comes, very few of these option writers will survive.

WHAT IS SPREAD TRADING

One often-ignored approach is spread trading. For the benefit of beginners, spread trading is when you buy one futures contract and sell a related futures contract at the same time. When you do this you are trading the difference or spread between the two contracts. An intra-market spread involves simultaneously going long futures of one kind in one month, and going short futures of the same kind in another month. An inter-market spread involves simultaneously going long futures of one kind, and going short futures of another kind. An example of an intra-market spread is if you bought February Crude Oil at $56.52 and sold March Crude Oil at 55.52. In this case the spread is $1.00 and the trader is hoping that spread widens. An example of an inter-market spread is if you bought the march Heating Oil and sold the March Unleaded Gas.

WHAT ARE THE ADVANTAGES OF SPREAD TRADING

Spread trading has many advantages as detailed below:

1. Spreads act like a true market with consistent trends and predictable behavior. As most experienced traders know, when too many people jump into the same strategy, it eventually stops working. In the early days of trend following, traders made huge profits on trends that seemed to last forever. However, in recent years since tens of billions of dollars began chasing these trends, the success of this type of strategy has dropped dramatically and major draw downs have begun to occur. Many spread strategies are currently not overused and still hold the potential for rewards for those using the right approach*.

2. Lower Margin -- Margins on spread trading can be very low and can allow the trader to produce a much higher return on their margin*.

3. Many spread markets to choose from -- There are many more spreads to trade than actual commodities. There are hundreds if not thousands of spreads that can be traded. This allows the trader to pick the exact market conditions he requires to enter a trade.

4. Diversification -- While many commodities are highly correlated, spreads often trade in a unique way that is unrelated to other markets. This allows for substantial diversification over standard trend following approaches.

5. Less Risk -- Spreads are generally considered less risky than outright futures positions**.

WHO ARE THE PARTICIPANTS

In the financial markets, spread trading is active and often dominated by banks and large hedge funds. However, in commodities, the active participants have traditionally been floor traders and or seasonal traders. Floor traders are exchange members who execute transactions from the floor of the exchange exclusively for their own account. Seasonal Traders use history to figure out what time of the year they should enter and exit spread trades. Although seasonal spread trading has been well known and popular for decades, it has rarely worked successfully in recent years.

DRAMATIC MARKET CHANGES HAVE CREATED NEW OPPORTUNITIES FOR PROFITABLE SPREAD STRATEGIES

The long-only commodity funds have radically changed the markets like the ice age did for the dinosaurs. Nowhere is this effect more powerful than in spread trading. Long only commodity funds have burst onto the scene in recent years and may soon hit $100 billion under management. These long only commodity funds typically hold huge quantities of futures contracts in the front month. When they roll these futures contracts to the next contract month, the results on the spreads can be dramatic. It is so powerful an event that traders have coined the phrase the "Goldman Roll" after the largest of the long only funds, based on the Goldman Sachs Commodity Index. While some professional traders have learned to profit from this phenomenon, those who have stuck to trading seasonal spread trades or other old spread trading strategies have tended to do very poorly.

The potential for huge profits is enormous for those who are creative and intuitive and the best time to get involved is before the masses catch on*.

A SPREAD STRATEGY THAT WORKS

The Alpha Spreads Program, which was been developed by an experienced professional trader, has recently been tested and traded by Vankar Trading of Chicago. It is now being offered on a limited basis by PowerTrade International. This proprietary program implements a unique and ingenious way of profiting from the spread movements caused by the "Goldman Roll"*. This strategy uses a specialized software program in determining optimal entry and exit points. In fact, this type of trading can't even be tested with most traditional system development packages such as Trade Station. As a result of the uniqueness of this program and the difficulty in testing it, Vankar spent considerable resources to validate and verify the results before actual trading began in January 2007.

CONCLUSION

While many trading strategies have failed in recent years, some spread strategies based on the "Goldman Roll" show exceptional potential. Strategies that use clever and unique approaches that are not well recognized by others stand the best chance of producing high profits for years to come.* For more information on spread trading, sign up for our Commodity Spreads Program and trade your first 60 Days complimentary.

* There is a substantial risk of loss associated with trading futures and options on futures. Past performance is not necessarily indicative of future results.

** No assurance or representation is being made that a spread trade reduces risk of loss.

Want to be a Successful Trader?

Successful Traders like to see where the edge is and seize it every time it appears! Our Commodity Spreads Program was developed with this in mind, by taking advantage of one of the very few true edges we see in the market: The Goldman Roll and Long Only Commodity Funds. Seize the edge, sign up for our Commodity Spreads Program and trade your first 60 days complimentary!