Are there fundamental reasons why one would trade the 12 month June calendar vs the Dec calendar early in the year ( of course if close to June or past June then Dec is the only option or Sept but from my analysis I would like to stick to either the June or Dec)


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jokertrader 

Are there fundamental reasons why one would trade the 12 month June calendar vs the Dec calendar early in the year ( of course if close to June or past June then Dec is the only option or Sept but from my analysis

I'm not sure what your asking.
Z8-Z9 despite being further back is more liquid than M8-M9
ZMZ fly's tend to be higher than MZM flys so MM will tend to be lower than ZZ

jokertrader 

I would like to stick to either the June or Dec)

I know people that prefer to do this as well. People who do, normally trade ZZ rather than MM.

Am traveling and thus dont have access to get data and chart..and would appreciate if someone could post the charts on the last several years on the ZZ ccontract to see whats the max divergence . Currently Z8-Z9 is at 4+.
What about Z10/Z11, Z11/12 etc..

2) What would be a similar year to compare this to in terns of fundamentals?

The goal of course would be to compare and enter short at the right time.. hoping for the correction and mean reversion

Just to clarify I meant z2010/z2011 the past historical data


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In 2000s, kept going up

In 2003, it reversed but then shot up again (yellow line between 2003 and 2004)

In 2004, light blue line went well past 5 closer to 8 without much of a pulll back

Of course in 2013, 2014 difference is much higher as oil shot up much higer suddenly

So bottom line: just by historical patterns and seasonality cannot predict a pull back
Is that accurate?

THe question really based on fundamental reasons.. is there one or few years that had similiar pattern. Then we can see what happened to the price of oil in those years and whether we expect the same. if yes, then we can see what happened to the price of the spread and extrapolate to this year (of course the thesis is will behave the same as those years)

So what I would do if i had the data would be to first eliminate the years that are negative
Then eliminate the years where the difference was flat.. since even if that was true it will not hurt us in the trade
Then only compare the years which are similar to current or have moved either more or reversed
Then look at the price of oil for those years and what happened to the price of oil in those years and correlate that to the movement
Then form a thesis whether that will either repeat or is random

USD has fallen and CL has risen

CobblersAwls 

I put this together last night. Over the last 5 years WTI and the USD index have been pretty highly correlated. There is a lot of talk about the fundamentals of s/d in oil and it's distillates being a large factor in moving price, but could the biggest factor be the strength of the US dollar?

I am sure you are doing this but would be great if you can share your current analysis on the fly.. to see if there are any mean reverting opportunities...... (sorry wont ask any more this month)When i get back need to download my own data and will perform the analysis and maybe use this to compare
thnx

SMCJB 

More Random Musings of a Spread Trader Crude curve is still in relatively steep contango. CLN5 trading approx $6 below CLZ8 (which is month 42) so ~15c/month. Normally you would expect contango to be steepest at the front, and hence butterflies to be negative. Well interesting last night the z5/z6/z7 butterfly settled -1c and the z6/z7/z8 butterfly settled +10c. The last time either of these spreads settled positive was back in Oct/Nov 2014 when crude was significantly higher than here, and of course was backwardated. The following scatter plot shows graphically how out of whack this is. Note CL_18 is currently CLZ6, CL_30 is CLZ7, CL_18 is CLZ8 Full Disclosure:- I am slightly short this Butterfly but do have hedges on against it

jokertrader 

USD has fallen and CL has risen

Yes, in the images I posted it represents an inverse correlation.

So as the USD strengthened, Oil price declined. As you point out USD has since weakened whilst Oil price has strengthened. So the relationship would seem to be holding.

jokertrader 

I am sure you are doing this but would be great if you can share your current analysis on the fly.. to see if there are any mean reverting opportunities...... (sorry wont ask any more this month)When i get back need to download my own data and will perform the analysis and maybe use this to compare thnx

This hopefully explains what I'm thinking... (aka which one looks to be the odd one out)
z (1), then zz (11), then zzz (121), then zzzz (1331)


For what it's worth, we're beginning to get to the point where I start deemphasizing z8