The Complete Guide to Spread Trading (McGraw-Hill Trader's Edge Series) [Hardcover]

Keith Schap (Author)

Book Description

Series: McGraw-Hill Trader's Edge Series | Publication Date: June 24, 2005

Spread trading, a low-risk, high-profit technique, involves buying a contract in one market while selling a different contract in another market to profit from the imbalance between those markets. The Complete Guide to Spread Trading covers the step-by-step mechanics for successfully executing more than 25 calendar, intermarket, interest rate, volatility, and stock index spreads. It explains both basic and advanced spread techniques and strategies, revealing market situations where spreads are most appropriate as well as clarifying what it means to buy or sell a spread, and more.

Editorial Reviews

About the Author

Keith Schap is a former senior writer for the Chicago Board of Trade and senior editor with Futures. The coauthor of Seven Indicators That Move the Markets, Schap has contributed hundreds of articles to Futures, Treasury and Risk Management, Derivative Strategies, and other trade journals.

Product Details

• Hardcover: 320 pages
• Publisher: McGraw-Hill; 1 edition (June 24, 2005)
• Language: English
• ISBN-10: 0071448446
• ISBN-13: 978-0071448444
• Product Dimensions: 9.4 x 6.2 x 1.2 inches
• Shipping Weight: 1.6 pounds (View shipping rates and policies)
• Average Customer Review: 3.2 out of 5 stars  See all reviews (5 customer reviews)
• Amazon Best Sellers Rank: #388,973 in Books (See Top 100 in Books)

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Customer Reviews

Most Helpful Customer Reviews

16 of 18 people found the following review helpful:

2.0 out of 5 stars Hard to understand, difficult to read, September 29, 2005

By 

Su (PA, USA) - See all my reviews

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This review is from: The Complete Guide to Spread Trading (McGraw-Hill Trader's Edge Series) (Hardcover)

I have been trading futures for about 3 years, and wanting to learn more about spread trading. This book is very dry reading, and difficult for a beginner to go through. No color graphs. Just boring tables with numbers, and many words. Not an easy book for a visual learner. Seasonality is hinted upon, but no good charts provided, and he does not really tell you when to do what, or what triggers or conditions to look for to enter a position. His section on spread options trading is perhaps easier to grasp, and I did learn a bit from that. A more advanced trader might perhaps glean more from this book than I did, but I do not recommend it for the beginner.

21 of 28 people found the following review helpful:

3.0 out of 5 stars Spreads for Arithmetic lovers., January 6, 2006

By 

-oo0(Delete me)0oo- "-oo0(Delete me)0oo-" (Lost) - See all my reviews

This review is from: The Complete Guide to Spread Trading (McGraw-Hill Trader's Edge Series) (Hardcover)

My name is -oo0(GoldTrader)0oo- Amazon will not let me hook up this post with my other lists. So when you do a search add this one to those. Amazon sucks!!

Complete Guide to Spread Trading by Keith Schap
ISBN: 0071448446

The greatest American chess champion still alive once wrote a book on how to play chess. After explaining the game, he simply teaches you how to kill. Similarly Ross's Spreads & Seasonals teaches the game simply, and dives straight to the heart of how you can place your first winning seasonal spread trade.

Mr. Schaps textbook is much more complex. It is written for the already active trader, who may want to switch to or try new spreads. Advanced traders, practicing spread traders, mathematicians, and employees of hedge funds and financial firms, will find this book useful. As a result it covers everything, and updates the older spread books into this century. Mr. Schaps works for the CBOT. He does not see a conflict of interest is suggesting that traders rely on brokers for research, I do.

The author explains spreads from the left hemisphere of the brain. Anything that can simply be shown to both sides of the brain in a picture, graph or chart, is instead reduced to a complicated array of digital formulas and intricate equations.

"Spreads ... produce better results than outright trades in futures or stocks."

General principles as well as advanced ideas in the various ways to spread are taught. You do not have to read it straight through, but you can move to the areas that address your current interests. Besides futures, he goes on to cover Option spreads.

"Spreads trade around long term means ... they work back towards the mean."

Instead of using the normal spread charts, where all a trader has to seek is the spread differential to go up. Schaps takes it two levels deeper with exhibits of columns of numbers, formulas, and statistics. If you don't use arithmetic every day, run far, far away from this book and its complicated mathematical explanations of otherwise simple concepts.

"It is a good idea to focus on the spread as a whole, not on the individual legs of the spread."

In normal spread teaching, the long contract is stated first the short second. Schap because he is using rows of numbers, has to remind you what is widening and what is narrowing for each type of commodity. You buy the widening or sell the narrowing. Any mix up as to what widening means and you can find yourself on the opposite side of the spread.

"A valid spread must have a structure that ties it to the economic reality you are trying to capture."

While other writers may use simple charts showing the historical tendency. Schap examples show a much shorter period of only one or two years. Where Schap does use charts, he shows two lines instead of one. Usually he uses exhibits with columns of numbers, as an alternative to charts.

"Price has no history. Only spreads have history."

Spreads carry messages about how the market needs to draw supplies into and out of storage. "The price differentials of the spreads help the markets to regulate the flow of goods into and out of storage." A carry (contango) market (price plus storage), wants product to go into storage. An inverted (backwardation) market (penalizes storage), wants product moved out of storage.

Schaps dispenses with the confusing terms of inter and intra delivery, but uses terms like "cointegration," and "yield curve shift."

A "Normal yield curve shows a healthy economy, inverted curve, near yield higher than far yield shows slower growth. How it is changing widening or narrowing is the question. When it is widening suggests increasing demand for credit. When the yield curve is narrowing, suggests that the fed is cutting back on the amount of credit it is creating relative to the demand for credit."

Because spreads isolate the effect of change in the width of the yield curve spread. Yield spreads carry information in advance.

Unlike many spread books that may suggest vague trade dates, for spreads. Schaps has an overview and advanced concepts of spread groups for traders to refer to before making a spread trade in a new commodity. He takes you to deeper layers with the widening, & narrowing. Deeper still the effect it has on storage.

Many spread books have been criticized for using optimized trade dates. Schaps often uses unoptimized exchange expiration dates to exit many of his spreads examples.

Many books may have a chapter about spreads. Only a handful of books are about spread trading. Anyone who takes trading seriously would want to have access to all of the Spread Trading books in his personal library. One successful spread trade could buy the whole lot! In a case like that, Schaps book must be included. " The Complete Guide," is not for the beginner or uninitiated trader. As a preview to the experienced mathematician about to trade a new futures group "The Complete Guide to Spread Trading," by Keith Schap is indispensable..

21 of 28 people found the following review helpful:

1.0 out of 5 stars A BIT SUSPICIOUS!!!..., September 19, 2005

By 

sSpreadSsTrader "sSpreadSsTrader" (Spreadsville, OH) - See all my reviews

This review is from: The Complete Guide to Spread Trading (McGraw-Hill Trader's Edge Series) (Hardcover)

I have yet to read this book, however, so far the ***** average rating is quite suspicious... Each one of the three *****-reviewers, does not have a single other review in their profile. I am at the stage where I am trying to learn as much as possible about spreads' trading, so I would greatly appreciate if someone who actually has real-life experience trading futures spreads and who has also read this book, to do everyone of the rest of us a favor, and post an honest review - please, we need a counterbalance to the nonsense posted by those who are most likely associated w/ the author or his publisher...