Relevant trading-focused information authored by key players in the futures,


Speculators Should Get To Know Energy Spreads

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Published by: Peter Karaverdian

Calendar Spreads

Seasonality brings a lot of good opportunity to the cracking petroleumpost products that derive from Crude Oil. Most intraday traders and speculators hear the work energy sector and first thing comes to their head is Crude Oil and how Crude Oil is relentless. That formost can be a true statement.

Today i’d like todiscuss not a specifictrade idea, (not seasonality) but just the idea of bringingawareness to the market that there are some great FuturesSpread Trading Opportunities, that are much more trend worthy, capital efficient, and less stressful of a trade. Of course all trades have risk, however with our short term trend trade approach on these energy calendar spreads, such as Heating Oil Calendar Spreads, Crude Oil Calendar Spreads, RBOB Gasoline Calendar Spreads, we can get a little more complex and add a simple one to one Crude Oil, vs another post petroleumproduct, thus creating a 1:1 Crack Spread.

There are far more higher ratio crack spreads mostly popular amongbig supplier, refiner, and institutional trading firms, such as 3:2:1 ratios, but today we will not look at all of this. In fact, these complex spreads may not all have Span Margin forgiveness by the Exchange.

In the Illustrations below we first start with a photo of the RB(Gasoline) vs CL (Crude Oil) Crack Spread for the last three years. We can see that this product is very mean reverting. Meaning in the last three years the range for the Crack Spread was at the low’s of 8, and Highs of 18. There was one exception to this price which was a drop in March 6th due to Covid 19 along with the rest of the markets.

We Later see in the Seasonal Tendencies of the next Illustration how the Same Crack Spread has been at all time Historical low points and the ODDS ARE we can look at some long opportunities. But How can we look at this Spread and make a shorter time frame swing trade out of it? Some people may go and trade and ETF or stock that follows these Futures Markets, but what if we want to ONLY speculate on the futures contracts. Option one there are Option Contracts. But they can get pricey and they do have Theta Decay Components in them. You can Sell Options for a Credit, but sometimes you can have liquidity issues there and also not enough premium to collect on most commodities. There can be exception in the energy sector but if you get use to doing that you will soon find in other markets very light liquidity to sell premium to anyone

Source: SeasonAlgo

ForteTrader Trend Follower Intra/Swing Trading

In the illustration below, is a 15 minute chart of the Crack Spread. We see on the last short uptrend made this last Friday, the Crack Spread moved up from 9.08 to 9.66, then before it closed the weekend at 9.53. A total of 45 ticks had potential to reward you with up to $450 per spread. This makes it worth while paying for the extra contracts it takes to put the spread on, and give you a good daily cash flow, speculating off of the Crack Spread, known to most as a Professional Institutional Trade. This is one of the many ways we show our clients how they can self direct their portfolios and make cash flow, as traders. Our Paid members get continual updates of new strategies as they come in our group.

Happy Trading

ForteTrader

support@fortetrader.com

www.fortetrader.com

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CFTC RULE 4.41 – HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF…



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