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

  #481 (permalink)
Market Wizard
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SMCJB View Post
The chart below shows the "Prompt Butterfly" (ie Month 1 - 2x Month 2 + Month 3) since Jan 1st 2014. As you can see, for the first half of last year, despite prices being high, and spreads also being high, the butterflies were continually negative, meaning spreads where in contango. Then in July/August last year that phenomenon changed and butterflies went positive. (Prompt Crude Prices peaked at $106.91 on 13-Jun-14 excluding expiration). Interestingly, despite the market dropping 50% the butterflies stayed that way - until this week! Note that this is not an expiration issue - March only just expired - and suddenly the JKM fly has plummeted with a month to go before expiry.

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Front fly settled -51c last night and currently trading -65c, That's the lowest a front fly has traded in a long long time

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  #482 (permalink)
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Held shorts for 2 hours but was forced to scalp it. I am bearish till REAL buyers show up. US $ at monthly resistance, time for her to cool off after a 1.5% move yesterday which is huge for $. CL at low end of weekly range. May be we will get some relief up move. CL had consolidated around 47.80 since Globex session.

Sign of REAL buying? when i am forced to pay up higher prices and CL never looks back. If no set up line sup it's OK . I gave her 2 hours while enjoying JOY RIDE. Not every day has to be 100 ticks day.



My posts are not meant to give financial advice neither do they imply that my method is special. "THIS IS WHAT I COULD BE IF I HAD A TOTALLY CARE FREE STATE OF MIND DURING TRADING" Mark Douglas.
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  #483 (permalink)
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More on dollar


Yes, continuing the trend... $ up and oil down again yesterday.

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  #484 (permalink)
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Is anyone taking trades? If one can survive days lik today and follow their plan- he can day trade CL. I tried my best per my PLAN but could not get more than 40 ticks on a trade. CL move of 300 ticks after 1 pm has nothing to do with contango, front month is doing this and current month is doing that, CL is bullish or bearish etc. The ONLY way i can relate to it is as a VIDEO game.

Do not assume anything till evidence is there. I shorted 3 times around 49.30 area before 1 pm. My mistake on the shorts was that i was not willing to book profits till 48 are got tested. That's OK becuase it fits my style. No major gain and no loss. When evidence was there, i did not mind going long at 49.42. This type of PRICE ACTION is not natural and my least favourite. However, if one can kep his COOL , it's also one of the most rewarding.

Note: Some kind of news will come out or some analysis and todays PRICE ACTION would look crystal clear. In fact every thing looks crystal clear after the fact. Traders who worry too much about what caused this and that- will not survive this kind of price action.



My posts are not meant to give financial advice neither do they imply that my method is special. "THIS IS WHAT I COULD BE IF I HAD A TOTALLY CARE FREE STATE OF MIND DURING TRADING" Mark Douglas.
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  #485 (permalink)
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many thoughts....no solution...just a view in the mirror...

so yesterday I got it wrong...100% completely wrong. I messed up. Why??...hmmm..well, how about for starters I was trading my signal instead of the context. I was all set up to short at a pullback to VWAP after a strong move lower. But that's not what I did. Nope. And I know better. Ouch.

Today I thought crude would make a pretty significant upside move...just to wax a few and show who's boss. I soon realized we were ranging. For the most part anyway, so I got out with a few (30 somethin') ticks. Aint' nothin for oil. I could have faded the range and I should have faded the range...but I didn't. Why??...I've never felt comfortable trading ranges... yet I can identify them fairly consistently.

So yesterday sucked, today was a kind of sort of scratch...and I have to wait the whole weekend to start all over on monday.

Since I been trading, I hate weekends! lol.

Hope all my futures.io (formerly BMT)'er family did well this week and let's have a great monday.

cheers

Johnny

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  #486 (permalink)
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Newbie questions


Devil Man View Post
so yesterday I got it wrong...100% completely wrong. I messed up. Why??...hmmm..well, how about for starters I was trading my signal instead of the context. I was all set up to short at a pullback to VWAP after a strong move lower. But that's not what I did. Nope. And I know better. Ouch.

Today I thought crude would make a pretty significant upside move...just to wax a few and show who's boss. I soon realized we were ranging. For the most part anyway, so I got out with a few (30 somethin') ticks. Aint' nothin for oil. I could have faded the range and I should have faded the range...but I didn't. Why??...I've never felt comfortable trading ranges... yet I can identify them fairly consistently.

So yesterday sucked, today was a kind of sort of scratch...and I have to wait the whole weekend to start all over on monday.

Since I been trading, I hate weekends! lol.

Hope all my futures.io (formerly BMT)'er family did well this week and let's have a great monday.

cheers



Johnny

Newbie questions

1. I have been trading oil with ETF's and may want to trade futures directly, apparently one has to buy a contract for 1000 barrels. I've read this but I think I need some verbal communication for this to sink into my head. So this means that if oil is trading at 50, in order to enter a trade you must buy a contract for $50,000? And enter a trade with allotments of 50,000 on your capital??

2. What happens when the contracts roll over into the next month? And you are in the middle of a trade. Does the contract you are holding for the prior month automatically rollover into the next month?

3. What is the average daily volume on WTI crude oil in terms of contracts and cash? Just to get a handle on how large this market is.

4. As to the writer above, as new to this, you just described an unsuccessful day of trading. How did you come to day trading? Can you present to me an argument, or to anyone who would care to answer, why you are day trading versus
swing or position trading?

The basic question, which strategy would be more profitable day trading or position swing trading?

Again, the basic question, thrown out there, why are people day trading versus position or swing trading?


Anyone give me an attempt at an argument as to why day trading would be more profitable than swing or position trading?

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  #487 (permalink)
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SMCJB View Post
Front fly settled -51c last night and currently trading -65c, That's the lowest a front fly has traded in a long long time

Very cool info.

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  #488 (permalink)
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e4williams View Post
1. I have been trading oil with ETF's and may want to trade futures directly, apparently one has to buy a contract for 1000 barrels. I've read this but I think I need some verbal communication for this to sink into my head. So this means that if oil is trading at 50, in order to enter a trade you must buy a contract for $50,000? And enter a trade with allotments of 50,000 on your capital??

You are referring to the notional amount and it works differently in futures than in stocks. Rather than put up the notional amount, the clearing broker requires that you put up a margin amount to be able to trade a futures contract. The margin is much less than the notional and is different depending upon the broker you clear through. There are 2 types of margin with most brokers - a day trading margin and a swing (overnight) trading margin. So technically, you are borrowing money from your clearing broker to trade futures.


e4williams View Post
2. What happens when the contracts roll over into the next month? And you are in the middle of a trade. Does the contract you are holding for the prior month automatically rollover into the next month?

Technically, if you have an open position upon expiration of a futures contract, you are obligated to the deliver or receive the underlying physical commodity. Some traders will do this if they wanted to buy or sell the physical commodity. When this happens, the exchange matches the buying and selling counterparties and thats when the notional value of the commodity gets exchanged. But most of us usually roll our position from one to the next month. So if you are long April, you would sell april and buy may at the same time and roll over your long position into may before april expires. From a mark-to-market perspective, it would not make any difference other than instead of being exposed to one month, you are now exposed to the next month market.


e4williams View Post
3. What is the average daily volume on WTI crude oil in terms of contracts and cash? Just to get a handle on how large this market is.

http://www.cmegroup.com/trading/energy/crude-oil/light-sweet-crude_quotes_volume_voi.html?41918.77524=


e4williams View Post
The basic question, which strategy would be more profitable day trading or position swing trading?

Again, the basic question, thrown out there, why are people day trading versus position or swing trading?


Anyone give me an attempt at an argument as to why day trading would be more profitable than swing or position trading?

There is a book called the profit magic of stock transaction timing by J M Hurst. Part of the answer to your question is addressed very well in this book. The other part is answered by your own personality and how well you handle the stress of monitoring markets, opening, managing and closing a position. How frequently you can do that and are able to handle the stress well. Some people just love to be in the markets and catch everything that comes their way and do very well, others take a comparatively relaxed approach and dont care about every little swing the market makes but go after the bigger ones usually by taking bigger risks and staying in positions longer.

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  #489 (permalink)
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e4williams View Post
Newbie questions

1. I have been trading oil with ETF's and may want to trade futures directly, apparently one has to buy a contract for 1000 barrels. I've read this but I think I need some verbal communication for this to sink into my head. So this means that if oil is trading at 50, in order to enter a trade you must buy a contract for $50,000? And enter a trade with allotments of 50,000 on your capital??

Each futures broker will set a day margin on CL, most seem to be around $1000 to $1500 per contract. The overnight margin or SPAN margin is set by the exchange. This is the performance bond ($) you have to put up to carry a position across the session close and into the next session. For CL the overnight margin is currently $4,900 on the front month contract. The risk manager at your brokerage will execute a margin call on your open position if at any time your account balance is unable to meet these performance requirements.


e4williams View Post
4. As to the writer above, as new to this, you just described an unsuccessful day of trading. How did you come to day trading? Can you present to me an argument, or to anyone who would care to answer, why you are day trading versus
swing or position trading?

The basic question, which strategy would be more profitable day trading or position swing trading?

Again, the basic question, thrown out there, why are people day trading versus position or swing trading?

Anyone give me an attempt at an argument as to why day trading would be more profitable than swing or position trading?

I think most traders, especially in CL, day trade because of the volatility of the contract and the open risk to hold a position for any length of time. I will sometimes hold an intra-day position trade in CL and typically use a stop of 40 ticks or more ($400 per contract) in order to hold that position during the day. If you want to get at those infamous 100 tick CL runs, your going to need more than a 10 tick stop to stay in the trade. Many traders are either unwilling or unable to carry that much risk per contract for any length of time. So it's most likely less related to success of one over the other, swing trading or day trading, but more related to how much heat a trader (and their account) can withstand to hold a position.

In order to translate your ETF strategy to CL, you will have to do the math related to where your stop would be in the ETF as it maps onto the CL price structure. Then figure out how much risk you would be exposed to in order to maintain the same trade management strategy. Another way of looking at this is, how many of your ETF shares would be required to equal one CL contract ? A $1 move in the price of CL equals $1,000 per contract, so how many shares of the ETF gives the equivalent $1,000 profit ?

Be Patient and Trade Smart
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  #490 (permalink)
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Macro view


If you follow the larger picture in regards to oil then this is a good article.

The real reason OPEC cut oil prices | Futures Magazine

I tend to agree with the basis of the article, although there are several factors that they don't address. Most of the are political though. I don't think to much changes in the next 6 months either. We could very easily see ~30's or ~70's before end of year but I really have no idea and don't see much value in predictions.

We haven't seen any capitulation from the industry yet. Until we see bankruptcy, bond defaults, above average M&A, etc. I don't see OPEC and Saudi Arabia pushing prices higher.

The US has shutdown many wells, ~10%, that were not as profitable at these prices and increased production on other wells that are profitable. We are also buying as much as can be stored to sell/use later. Many countries (Iran, Russia, Nigeria) that rely heavily on oil as a main source of income has increased production to offset the lower revenues. Until this changes there isn't much reason for oil to go much higher.

It is my belief that several of the OPEC countries (as well as corporations) were aggressively buying the dollar as oil started falling to offset many of their losses. The dollar is still very strong and doesn't show much sign of a major shift.

I still have a core short, SCO, position from early Dec. and have been trading around that. I am more of a swing trader and like to hold positions for at least a week and sometimes a few months. I have been trading a little more aggressive lately as we have been in a nice range. I currently have a small long position on via UCO with an average of ~$7.70 looking for 9+.

It takes a very disciplined trader to trade CL daily. I am able to watch it close enough intraday so I seldom trade more than a few contracts. Good luck to those that are trading it daily!

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