Russell Nasdaq spread trade is based on the correlation between Small Cap Stock Index, Russell, and Growth Stock Index, Nasdaq.
The corresponding ETF/futures are IWM, /RTY and QQQ, /NQ for Russell and Nasdaq, respectively. The corresponding notional values in $USD are calculated as follows:
- number of shares x IWM ;
- number of contracts x 50 x /RTY;
- number of shares x QQQ;
- number of contracts x 20 x /NQ.
For example, for trading long IWM short QQQ spread one can use 100xIWM-100xQQQ for profit/loss calculations. Keep in mind, that spread trading with ETFs is not capital efficient. Depending on a broker, one may need about $20000 to enter 100 IWM shares versus 100 shares of QQQ.
One Russell/Nasdaq futures contract is roughly 5/10 times larger than the corresponding ETF. However, $15000 is enough to enter Russell Nasdaq spread trade on TOS. At the moment, a delta neutral position is given by:
long 2 /RTY, short 1 /NQ. 100/RTY - 20/NQ expresses the above spread in $USD:
One can try to profit from the widening or narrowing of the spread. I like Russell Nasdaq spread because it is characterized by high volatility. /NQ leg can be replaced by /NQ options. My trades are posted @
https://www.the.trading/search/label/Russell.
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