InterCIty Spread CUS v CHI 50.0/51.0

To illustrate the potential use and impact of inter-city spread quotes I’ve posted a 50.0/51.0 bid/ask set of quotes for the CUS/CHIX13 inter-city spread.  (Click here to jump to the CME DataSuite page showing the quote or look for links in the right column of the home page.)

As of the time of this writing CHIX13 was 118.0/120.6 and CUS X13 was 168.2/170.8.  A 50 bid would be the equivalent of buying CUS at 169 while selling CHI at 119, while a 51 offer would be the equivalent of selling CUS at 169.6 while buying CHI at 118.6.  The inter-city spread trade allows for trading on “inside” prices while also reducing outright risk.  In my case, it’s a way to transfer a risk (position) from one contract to another. Others may evaluate it as a view on how CHI will perform against the 10-city index.

Some disclosure: while one might consider this trade as a spread trade and may even be margined as such, I would advise that traders also analyze it as two separate trades.   For example, the difference in prices means that a 5% move in each contract will not result in the dollar spread remaining constant.  (I’m willing to buy/sell extra CHI contracts if someone wants to do a price neutral trade – e.g. 3 CHI v 2 CUS)

I’d be open to such inter-city trades between other regions.  Feel free to contact me (johnhdolan@homepricefutures.com) if you’d care to discuss this trade or any other.