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Calendar Spreads
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Created: by kurlare Attachments:1

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Calendar Spreads

  #1 (permalink)
Trading Apprentice
Philadelphia, PA, USA
 
Futures Experience: Advanced
Platform: TT(X_Trader), CTS (T4)
Favorite Futures: RBOB Gasoline Futures
 
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Calendar Spreads

Anyone else active in the energy calendar spreads? RB, HO? That's pretty much my specialty but I would like to hear if anyone trades those or NG/CL spreads. Not usually a lot of action there but occasionally it can get wild.

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  #2 (permalink)
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  #3 (permalink)
Market Wizard
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I trade a lot of CL spreads (ie this post) and some NG spreads, but don't currently trade any of the other energies presently. I've traded Brent, NGLs, Electricity a little Gasoil & a little Fuel Oil in the past as well, but never really traded any RB (or HU) or HO. I think you will find most people here that do trade commodity futures mostly trade outrights.

I used to trade CL-NG spreads, on a Btu basis, (ie CL/5.8-NG) a long long time ago. All OTC and all longer dated rather than spot. Thankfully that was before, CL went to $140 and NG to <$5, which would have blown me out!

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  #4 (permalink)
Trading Apprentice
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Favorite Futures: RBOB Gasoline Futures
 
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Thanks: 35 given, 15 received

How do you trade electricity? I thought that was restricted to firms with generation capacity.

In my experience the CL spreads are extremely narrow and move very slowly if at all. However, this is usually looking at the spread between the front month and the first month out. Are there back months in CL that you like most? I know that in RB, Sep/Oct and Mar/Apr are guaranteed great months for volatility. Mar/Apr is good for NG too. Finding some new spread markets would be great for me, as my biggest obstacle in trading is figuring out something to do when there's very little volatility. In the RBOB spreads this can be months at time.

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  #5 (permalink)
Market Wizard
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kurlare View Post
How do you trade electricity? I thought that was restricted to firms with generation capacity.

No Sir. been a de-regulated market for 20 odd years. While almost all electricity trading was done on a bilateral basis and hence governed by the Commodity Exchange Act which made it very difficult for individuals to participate, NYMEX actually had some electricity futures contracts that did trade a little, as far back as the mid 90s. ICE also have had an active online electronic power market since the 90s as well. It was the only real competitor to Enron Online. With the advent of Dodd Frank though ICE have converted all their cleared swaps and cleared physicals to futures contracts. These are readily available on ICE but believe you will need access to their S2F products which is more difficult to find - many brokers dont have the facilities to offer you access, and the monthly fees are high.

Unfortunately the power markets are far less liquid than they used to be. Many of the pure traders are gone (Enron, AEP, the Banks etc), and there has been so much consolidation in the utility sector. Back in the day there were liquid well defined markets for Cinergy, Comed, Entergy, ERCOT, NEPOOL, NY, PJM & TVA in the East and COB, Mid-C, SP, NP & Palo in the west. Several of these locations don't trade at all any more, and several others have very little real liquidity - at least electronically. A lot of the electricity cleared through ICE and Clearport is actually executed Over-the-Counter and then just block cleared.

kurlare View Post
In my experience the CL spreads are extremely narrow and move very slowly if at all.

I would agree with that assessment, but don't view that as a negative. ]I guess it depends what you are looking for.

kurlare View Post
However, this is usually looking at the spread between the front month and the first month out. Are there back months in CL that you like most?

Take a look at that post I referenced in my first reply

SMCJB View Post
I trade a lot of CL spreads (ie this post)


kurlare View Post
I know that in RB, Sep/Oct and Mar/Apr are guaranteed great months for volatility. Mar/Apr is good for NG too. Finding some new spread markets would be great for me, as my biggest obstacle in trading is figuring out something to do when there's very little volatility. In the RBOB spreads this can be months at time.

I suspect we look for different things in trades. I'm very much a Arbitrage/Relative Value/Stat-Arb/Mean Reversion/Quant style trader, while you sound like your probably more of a momentum style trader.

You might want to take a look at the CLM5-CLZ5 and CLZ5-CLZ6 spreads. These are spreads that are very liquid and do move quiet a bit. They are also spreads that get enough outright trading and dealflow in them that don't just 100% follow the front end of the market all the time.

You also might want to look at some of the Brent-WTI spreads. I believe both ICE and NYMEX have listed spreads on the intercommodity-spread so no leg risk. They can move around as well.

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  #6 (permalink)
Trading Apprentice
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How long do your spread trades typically last? Are you out by the end of the day, do you hold overnight? Thanks.

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  #7 (permalink)
Market Wizard
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Most of my CL trades I have from several days to several weeks but there definitely are times when I'm in and out in the same day.

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  #8 (permalink)
Trading Apprentice
Philadelphia, PA, USA
 
Futures Experience: Advanced
Platform: TT(X_Trader), CTS (T4)
Favorite Futures: RBOB Gasoline Futures
 
Posts: 28 since Feb 2015
Thanks: 35 given, 15 received

I know you aren't a momentum trader but there's the beginning of backwardation going on in apr/may RB. If you wanna take a look. If it holds I'd say that indicates a fundamental shift, and there's some good trades to be had.

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  #9 (permalink)
Market Wizard
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kurlare View Post
I know you aren't a momentum trader but there's the beginning of backwardation going on in apr/may RB. If you wanna take a look. If it holds I'd say that indicates a fundamental shift, and there's some good trades to be had.

I'll take a look but very busy today with NG expiry.
I need to look at CL as well. The froont end of curve is moving in a way not seen in the last year.
I'll do a better chart later.
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  #10 (permalink)
Market Wizard
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kurlare View Post
I know you aren't a momentum trader but there's the beginning of backwardation going on in apr/may RB. If you wanna take a look. If it holds I'd say that indicates a fundamental shift, and there's some good trades to be had.


SMCJB View Post
I'll take a look but very busy today with NG expiry.
I need to look at CL as well. The froont end of curve is moving in a way not seen in the last year.
I'll do a better chart later.


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As promised, but in the other thread,

https://futures.io/commodities-futures-trading/34295-cl-crude-oil-futures-contract-crude-analysis-thread-47.html#post477974

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