Typically the 3 year moves a little more than the 10 year, but the tick value is ~$28 a tick on the 3 year and ~$80 a on the 10 year. Which means I need to trade more 3 year contracts to hedge myself well, but the 3 year moves more and the tick values are different so it's tough to know the best ratio to use. If I used a ridiculous amount of contracts to get the best ratio, my costs as a scalper will be too big to make it a viable to scalp intra-day so I have a choice of 1:1 2:1 and 3:1. So, 3:1 (or three 3 year contracts vs one 10 year contract) is pretty expensive to trade, 8 contracts are traded to get in and out and in fact it gives slightly more weighting towards the 3 year which moves more than the 10 year anyway, and so straight away I ruled it out. Plus the 3 and 10 year on a daily chart pretty much stay together, so there are very few opportunities with such a good hedge to get in and out as a scalper. Therefore I plan to trade a 2:1 and a 1:1 ratio, which in terms of tick value, weights the 3 year with a tick value of 70% and 35% the size of the tick value in the 10 year.
1:1 weights the 3 year with a tick value of 35% the size of the 10 years tick value and is therefore very dependent on the 10 year bond. The spread looks similar to the 10 year bond just with a tighter range. It still holds in pretty well and with the tight range on the individual products it creates more opportunities. Trading with a 2:1 ratio and the spread is pretty decent! unfortunately sometimes the intra-day range is incredibly tight, slightly larger than the spread between the bid and the ask of the spread.
I will try and trade the tighter spread at first, and will probably adopt the strategy of if the spread isn't moving much early on in the day trade the looser one. I will see how easy it is to work bids and offers, but nonetheless it will give me a way to scalp the 10 year and hopefully one day I can just scalp it outright.
Below are the two spreads over the last 2 and a bit days (the difference between the horizontal lines is 1 tick, the spread between the bid and the ask on the two spreads is ~0.85 ticks and 1.2 ticks). Although a good last 2 days (from the perspective of the charts) it never does anything too extreme. Almost every day it bounces around a 3-6 tick range, even though the spreads can trend up or down for days, the intra-day charts seem almost always pretty good. I wish I could get a spread which gives profit on the 3 year as much as the 10 year, but it's not really viable, instead I'll keep in mind the 3 year is just some kind of a hedge and see if I can work bids and offers and see if I can find some good opportunities to lean on the 3 year and scalp the 10 year outright.
Below is the last 2.5 weeks, with the 10 year plotted as an area graph, all plotted within scale with each other. The sharp quick moves almost always have occurred between the close and the open when I will be flat.
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