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Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
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Hi @Hailkay and Welcome to nexusfi.com and the Crude Oil Analysis Thread.
The purpose of this thread is to discuss analysis, fundamentals and trading styles particular to the oil markets. It isn't designed to be a trade journal. If you would like to start a trade journal a more appropriate place would be https://nexusfi.com/trading-journals/. Alternatively if you have something Crude Oil Specific to discuss there are many people watching this thread who would participate.
If only I could hedge my z19/20 with u19/h20 combined with mini crude until this thing rolls over....how to try to be delta neutral/positive/negative.....hmm maybe tracking the daily std deviation of each set of combined positions over a few days and averaging would work
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
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That's a 12 month versus a 6 month? What ratio would you use?
If you did it
1:1 you would be left with z19/u19 spread vs z20/h20 spread which is very unbalanced in that you have a 9 month versus a 3 month, but additionally the 9 month is closer to the front and will have a higher beta to steal a stock term.
1:2 you would be left with +1z9 -2u9 -1z0 + 2h9 which is more balanced. Now your long the 9 month z9/u9 and short the 6 month u9/ho and short the 3 month z0/h0.
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
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Posts: 5,049 since Dec 2013
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What a bunch of rubbish - what I typed would be true if it was u0/h1 and not u9/h0!
1:1 you would be left with u9/z9 spread vs h20/z20 spread which is very unbalanced in that you have a 3 month versus a 9 month but the 3 month would be more volatile than the 9 month
1:2 you would be left with -2u9 +1z9 +2h0 -1z0. Now your short the 3mth u9/z9 and 6mth u9/h9 versus long the 9mth h0/z0
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,049 since Dec 2013
Thanks Given: 4,384
Thanks Received: 10,206
Interestingly over the last year the standard deviation of the 1:1 spread is 66.4c and the 1:2 spread 66.2c, ie identical. Their trajectory's have been very different though!
Yes the nearer spreads will be more volatile but will it be 3 times more I don’t think but will check but the real scenario I am trying to hedge is to eliminate or catch sudden spikes and if it happens then get out of the nearer spreads and wait to settle but if I do this then I will be unhedged for that time which may not be wise especially since crude can trend for a while....and all this until late summer by which time I think Iran,Saudi,Trump, driving season will all be done and and Z19/z20 should narrow...time to think a little more
