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The CL Crude-analysis Thread
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The CL Crude-analysis Thread

  #1921 (permalink)
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Calrification on statement - Unfortunately these are very difficult to trade

Is this a general statement or statement based on current curves? If its a general statement.. especially for fly curves.. then what is the point of analysing these fly curves?
z789 22c under z890,
z890 8c under z901,
z901 37c over z012
z012 25c over z123 and
z123 flat to z234

a) normally what are we trying to deduce from comparing these fly curves?
b) how does that help us formulate an entry with flys?
c) above 2 questions for calendars i.e. what are we trying to reduce looking at 2/few calendar spreads and how does this help us formulate an entry with calendars?

Management with calendars: So lets say we enter long a calendar and its starts moving against us? whats the adjustment? make it a fly?

So lets say i have a 1 month calendar long and its starting to loose money
1) whats the effect of adding short the next subsequent 1 month calendar
2) effect of adding short the next subsequent 3 or 6 month calendar (widening the legs)
3) effect of adding short NOT the next subsequent 1 month calendar but later on.. seems almost like a condor

apologize for all these questions: but trying to formulate things to do and see in my head

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  #1922 (permalink)
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jokertrader View Post
Calrification on statement - Unfortunately these are very difficult to trade

Is this a general statement or statement based on current curves? If its a general statement.. especially for fly curves.. then what is the point of analysing these fly curves?


SMCJB View Post
For 3 month spreads only look at HMUZ. There's not much liquidity outside of the 4th spread. Currently H8M8
For 6 month spreads only look at M and Z. There is good liquidity in the first 3 spreads (m7z7, z7m8, m8z9), okay liquidity in the next 2 (z9m0, m0z0) and nothing past that.
For 12 month spreads you can look at the first M-M spread but other than that only look at Z-Z spreads. There is good liquidity in the first 2 spreads (z7z8, z8z9), okay liquidity in the next (z9z0), z0z1 it depends on the day anything past that trades by appointment only.
I find building forward curves of the 1,3,6 & 12 month spreads to be informative.

Expanding on my previous answer, right now z9z0 has a 3c bid/ask, z0z1 8c, z1z2 11c. z2z3 11c, z3z4 21c.
Hence the bid/ask on the z901 fly is 11c, z012 fly 19c, z123 fly 22c, z234 34c!
As such these are very difficult to trade (at least at value). Saying that at times they do tighten up. Problem is sometimes you get in and can't get out. All depends what part of the curve we are talking about.

jokertrader View Post
a) normally what are we trying to deduce from comparing these fly curves?
b) how does that help us formulate an entry with flys?
c) above 2 questions for calendars i.e. what are we trying to reduce looking at 2/few calendar spreads and how does this help us formulate an entry with calendars?

a) With regards to zzz (and zmz/mzm) flys I am personally looking for high probability mean reversion trades that are not outright price dependent. The trades I have on basically say that the current curve shape can not be maintained.
b) Large statistical outlier / deviations from the mean.
c) 2 month Calendars are very 'outright price dependent' hence why I prefer flys. See point a) - I'm not trying to make money on a directional move in a spread, but a relative move.


jokertrader View Post
Management with calendars: So lets say we enter long a calendar and its starts moving against us? whats the adjustment? make it a fly?

There was an excellent set of video's that Doug Huggins of Quantitative Markets Analysis did for ICE a few years back, where over several months Doug modeled, identified and recommended trades in Gasoil Spreads and Brent/Gasoil Box's using this type of analysis. Unfortunately ICE have now taken them down. I wish I had a copy.

Quick example.
Lets say you look at the market and the spread curve and it looks like this.
  • Mth 1/Mth 2 +4
  • Mth 2/Mth 3 +3
  • Mth 3/Mth 4 flat
  • Mth 4/Mth 5 +2
  • Mth 5/Mth 6 +1
You identify that the Mth3/Mth4 spread is undervalued and buy it.*
Now imagine that tomorrow the market drops and the spread curve looks like this.
  • Mth 1/Mth 2 +2
  • Mth 2/Mth 3 +1
  • Mth 3/Mth 4 -1
  • Mth 4/Mth 5 flat
  • Mth 5/Mth 6 flat
You were right, but you lost money, because your spread had a directional bias.
Now imagine that you sold Mth2/Mth3 @+3 and bought Mth3/Mth4 at flat. Now you made money**.
Or imagine that you bought Mth3/Mth4 at flat and sold Mth4/Mth5 @+2. Again you made money.
Now imagine you sold both Mth2/Mth3 and Mth4/Mth5 and bought two Mth3/Mth4.
Obviously I used an example to make my point but hopefully you understand what i mean.

* You need to be sure there isn't a fundamental reason for this
** Assuming your commission structure is low enough



jokertrader View Post
So lets say i have a 1 month calendar long and its starting to loose money
1) whats the effect of adding short the next subsequent 1 month calendar
2) effect of adding short the next subsequent 3 or 6 month calendar (widening the legs)
3) effect of adding short NOT the next subsequent 1 month calendar but later on.. seems almost like a condor

apologize for all these questions: but trying to formulate things to do and see in my head

If you buy both the mth1/mth2/mth3 fly and the mth2/mth3/mth4 fly what do you have? what happens when you add a mth3/mth4/mth5 fly?
If you buy a mth1/mth2/mth3 fly and two mth2/mth3/mth4 flys and a mth3/mth4/mth5 fly what do you have?
(No need to answer, just highlighting something).

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  #1923 (permalink)
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Looking at 3 month, 6month, 12 month calendar intraday charts


Looked at different combinations.. 1 month, 3 month, 6 month and 12 month calendars on a 15min, 30min chart to see how they look, volume, volatility etc...

Its funny even compared to the close months.. the best i could find was on the Dec contract - both 12 month and 6 month calendar on the Z was the best to chart

Of course i didnt try every combo but did try U17, H18 with some of these above i.e. 1 month, 3 month, 6 month etc

Hypo 1: So in my limited test, looks like right now.. its the Z calendars we want to trade.. if we are looking for directional trades

Of course the goal is also to use this info to find mean reversion but i thought its interesting that its only the Z calendars that seem to have nice volume and decent volatility


Hypo 2: based on Margin vs Volatility/Range: 6 month seems to be a better deal if u want more directional
6 month Z calendar: From April 21st: Seems like range is -0.310 to 0: So about $ 310
12 month Z calendar: From April 21st: Seems like range is from -0.230 to 0.290: So about $520
Seems like 12 month margin for Z17 is around $1105
6 month margin for Z17 seems to be $580

Note: Will try to analyse the fly post above when i have a little more time

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  #1924 (permalink)
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Reuters :- Iraq's fuel oil exports soar despite OPEC supply cut

Iraq's fuel oil exports soar despite OPEC supply cut | Reuters

The soaring exports of high-quality straight-run fuel oil (SRFO) are an attempt to support revenues amid the OPEC cuts in which Iraq reluctantly agreed to participate, saying it would reduce crude output by 210,000 barrels per day (bpd).

This is interesting because there's low quality fuel oil, which is just burnt as a fuel and then there's high quality fuel oil, aka Straight Run, which is further refined/cracked. Obviously not as good as crude itself, but still an end-around to the cuts.

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  #1925 (permalink)
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Reuters:- Rising U.S. oil production knocks OPEC off course: Kemp
Rising U.S. oil production knocks OPEC off course: Kemp | Reuters

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  #1926 (permalink)
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With such a slide do we see any opportunites based on the forward curve or comparing calendars or flys? I have been busy this week just asking if anyone sees anything


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  #1927 (permalink)
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jokertrader View Post
With such a slide do we see any opportunites based on the forward curve or comparing calendars or flys? I have been busy this week just asking if anyone sees anything

Been a very even curve shift. Rather boring given the size of the move.
Nearly all the backwardation has gone from the curve with M8-Z8 at flat the only non contango part now.

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  #1928 (permalink)
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Question is, if there is already a bottom. Seasonal Trend would suggest a bottom in mid-may.

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  #1929 (permalink)
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Just looking at John Kemp's Commitment of Traders analysis.
Hedge funds cut their combined net long position in NYMEX+ICE WTI by -61 million bbl to 224 million bbl in the week to May 2. Long positions were cut by -24 million bbl while short positions were raised by +37 million bbl. Hedge funds cut their net long position to the lowest level since Nov 29 (pre-OPEC announcement). The ratio of long to short positions in NYMEX WTI was cut to 2.9:1 from 4.2:1 a week earlier and again the lowest level since Nov 29. Hedge funds have embarked on a new short-selling cycle in NYMEX WTI, the seventh since the start of 2015, with shorts up to 109 million bbl on May 2 from just 63 million bbl on Apr 18:
and then...
Hedge funds cut their net long position in NYMEX gasoline by -24 million bbl, establishing a net short position of 3 million bbl in the week to May 2. Long positions cut by -4 million bbl but short positions raised by +20 million bbl. First net short position since Aug 2016. Ratio of long to short positions was cut to just 0.9:1 from 1.6:1 the prior week:

and...
Hedge funds cut net long position in NYMEX #2 heating oil by -26 million bbl and established a net short position of almost 1 million bbl. Long positions were cut -11 million bbl while short positions were raised +15 million bbl. The ratio of long to short positions was cut to 1:1 in the week to May 2 down from a 2.1:1 the prior week and a recent high of 5.1 on Mar 7:

Which all adds up to, bearish hedge funds!

As an aside, in Natural Gas they almost have the largest long position since before 2010.

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  #1930 (permalink)
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SMCJB View Post
Hedge funds cut their combined net long position in NYMEX+ICE WTI by -61 million bbl to 224 million bbl...The ratio of long to short positions in NYMEX WTI was cut to 2.9:1 from 4.2:1
Hedge funds cut their net long position in NYMEX gasoline by -24 million bbl...Ratio of long to short positions was cut to just 0.9:1 from 1.6:1


Hedge funds cut net long position in NYMEX #2 heating oil by -26 million bbl and established a net short position of almost 1 million bbl...The ratio of long to short positions was cut to 1:1 in the week to May 2 down from a 2.1:1


Which all adds up to, bearish hedge funds!

Will be interesting to see how positioning has changed during the latest sell-off to $44's. Perhaps recent long liquidations could be bullish for oil, but then again we could some rotation around these levels followed by another leg lower. I suppose it depends on a few factors, including how seriously the market takes OPEC/NOPEC production cut talks and how far the Saudi's are willing to go to bolster their Aramco IPO px.


Quoting 
As an aside, in Natural Gas they almost have the largest long position since before 2010.

This is interesting. What happened last time round (I'm presuming px fell barring some unexpected weather for that time)?


Last edited by CobblersAwls; May 8th, 2017 at 05:31 PM. Reason: spelling
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