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The CL Crude-analysis Thread
Started:December 17th, 2014 (02:33 PM) by tturner86 Views / Replies:125,828 / 1,754
Last Reply:December 4th, 2016 (01:02 AM) Attachments:450

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The CL Crude-analysis Thread

Old August 18th, 2015, 08:48 PM   #1231 (permalink)
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@SMCJB and other spreaders;

I'm currently looking at expanding my knowledge on trading spreads, in particular within energies. I have been testing out the CLV5/CLZ5 spread, taking the view that the spread will tighten. I have been recording the daily moves, looking for the spread to either break out wider to around the $2.60 level (stop) or tighten to around the $1.00-$1.16 level (target).

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My reasons for this trade were simply that from looking at a variety of cal spreads, most seem to be at extremes of the spread. For example the CLZ5/CLN6 spread was trading over $5 when I started last week. I also felt that CL would probably have a bounce at some point following the recent downtrend and the front month would bounce harder than the back month.

Now - this is all well and good seeing as the trade so far is working out this week, however my method is very amateur. I'd like to look into more advanced techniques and methods for trading energy spreads so that I can start to look at more variables and truly understand spread dynamics and what causes them to widen/tighten and different ways they can be used to create an edge. Can anyone recommend any good resources that I can read up on that will provide a good introduction as well as covering advanced topics?

Cheers,

Awls

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Old August 18th, 2015, 10:00 PM   #1232 (permalink)
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@CobblersAwls Yeah! @SMCJB tell us we wanna know!!! LOL.

I am on the same boat brother.
It cannot be as simple as backwardation and contango, can it?

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Old August 18th, 2015, 11:37 PM   #1233 (permalink)
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@CobblersAwlsIt cannot be as simple as backwardation and contango, can it?

Haha, perhaps it is? I doubt it though and I have no idea where to start in terms of research. Google throws up little info on it other than the very basics and there is little info on 'trading energy spreads' in book form - perhaps it's really only the professionals that use these methods?

Crack spreads were a lot easier to get my head round and I can see how you could begin to formulate trading ideas using them. Likewise with cross-products like WTI vs Brent spreads.

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Old August 19th, 2015, 01:27 AM   #1234 (permalink)
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Haha, perhaps it is? I doubt it though and I have no idea where to start in terms of research. Google throws up little info on it other than the very basics and there is little info on 'trading energy spreads' in book form - perhaps it's really only the professionals that use these methods?

Crack spreads were a lot easier to get my head round and I can see how you could begin to formulate trading ideas using them. Likewise with cross-products like WTI vs Brent spreads.

Yep Crack and Crush spreads (for Soybeans) sort of make sense. Just bear in mind that you need to add the Initial Margin you require per contract, that is, about ~5k per instrument so I think you at least need ~$20k in your account to trade the Crack Spread.

Check 19:30 below on initial margins...

https://www.youtube.com/watch?v=szeFtH8cOwE&list=PLPVve34yolHbN1Kj2nL-BclLibdYySrfP

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Old August 19th, 2015, 04:20 PM   #1235 (permalink)
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Futures Edge on FIO
Could explain the lack of closures amongst smaller oil companies in the US:

"Smaller companies with riskier credit bought insurance against an oil crash, which locked in higher prices and reassured lenders that they’d get paid back."

Full article:

How the Worst Performing Oil Companies Are Making More Than Exxon - Bloomberg Business

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Old August 19th, 2015, 06:37 PM   #1236 (permalink)
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@ElChacal

I found this a very good read. It's quite brief, but does give the most information I have managed to find so far on how you might form a trade. The Propane/Oil spread is particularly interesting - especially the suggestion of a costless collar on crude.

http://www.pfgbest.com/services/managed/futures/education/pdf/Trading_Strategies...t_Environment_Aug_07.pdf

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Old August 19th, 2015, 07:33 PM   #1237 (permalink)
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@CobblersAwls
Propane is getting more and more interesting because is getting more and more used as primary fuel in thermal power plants. There has been plenty of new LPG storage construction along US gulf coast. The capex to store this product is much lower than that for LNG and the heating value is equivalent making it an attractive option.

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Old August 19th, 2015, 08:51 PM   #1238 (permalink)
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Old August 19th, 2015, 11:42 PM   #1239 (permalink)
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Old August 19th, 2015, 11:43 PM   #1240 (permalink)
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Where will this stop?


Where do you guys think Oil will stop at? It's at a trend line now, well going through it.

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