TRADER'S CORNER

arrowloopboy

For ever odd wrote: »

Over a hundred points spread between Dec 15 and Jan 16 light crude..... Buy Dec sell Jan?

100 points spread .

For ever odd

Dec 15 $44.60
Jan 16 $45.79

6 point spread on each, Dec15 rolls over on 19th of this month.

Buy Dec sell Jan at the same time?

ixus

Dec Jan spread has widened in last couple of days from approx 0.90 to $1.20 breaking range as we get closer to options expiry and the Dec contract expiry in a few business days. Indicates Energy trader wants to increase their physical delivery ahead of the expiry. Plenty of supply out there in the near term.

Opec meet on Dec 4th, they've already flagged won't be cutting.

For ever odd

Devil is in the detail, I did further reading on this and Some spreadbetting firms roll the contract over the night before expiry. So gains would most likely be limited, and may even result in losses.

Anyone any experience of this?

arrowloopboy

Here's where I'm trading from .

For ever odd

arrowloopboy wrote: »

Here's where I'm trading from .

Brent oil Dec15 is expiring at 7.30 Thursday evening. The screenshot shows a difference of 74 points between Dec and Jan.it is now 66 points.

Watching Brent to see what happens. Not much experience with calendar spread but looking to add as a strategy. Work with me on this one please.

ixus

Brent options just went out today. Majority of volume will be in Jan from now.

There's calendar trading, trading the futures curve. Then there's trading expiry. The closer it gets to expiry, the more random a move is in the front month calendars. 100 point moves in short periods are not uncommon in last day or two.

I don't spread bet, sonforgive my ignorance, but is there a calendar product or are you taking two outright positions with spread better?

Calendar trading education can be found on cme or ice websites.

For ever odd

It would be two outright bets. Short term maybe a week or so before expiry. It would cost 6 points on each to get in and out so 12 points in total. But with a calendar spread of 125, I would be take it on based on a possible mean reversion.

I am working off the assumption that there is over supply at the moment so cost of storage is more expensive for the back month and as front month nears expiry the spread will narrow. Could be wrong?

ixus

It is random into expiry, as in the last few days as most physical players will have done their business and rolled into next contracts long ago.

If there's an oversupply in the near term, the Dec contract has to find a bidder into expiry. So, in theory that price should weaken relative to Jan.

The thing about running two outright legs as opposed to an integrated Cal spread is that you have to leg in or out via outrights and end up paying up in fast markets and also losing those spreads. In theory, you don't want to run stops in either as you that is messy. The Cal should be relatively agnostic to outright moves.

For ever odd

Cheers, I probably got it the wrong way round alright.

My thinking was simple, over supply will lead to storage space shortage therfore storage expenses would increase in the near term. If oversupply persists then storage prices should keep going up. I would be betting on the premium of storage cost getting discounted on Jan contract and moving out to Feb the closer Dec contact comes to expiry.

Now as I've said I have little experience with calendar spreads, and my thinking could be totally flawed, that's why I am throwing it out there to see what you guys think.

On a side note El nino Could bring a very mild winter, I have yet to turn on the heating since last spring.

ixus

I see your logic but it is the asset i.e. oil that gets cheaper here as it bids for storage. For example. A growing supply of houses and a static number of purchaser/renters.

Re calendars, the curve is traded a lot further out. Your near term months tend to be tight absent an event like a pipeline drop or similar. If you are paying up 12 tick spread on entry and exit, you have to nail that trade. Further out the curve is where you get more action i.e. june 16 v dec16. You gotta be more aware of supply fundamentals to trade this really though.

For ever odd

arrowloopboy wrote: »

In at spot price of 4503.00/4506.00 ,but in a jan 16 contract which will be automatically rolled to furthest out contract .

Arrow, can I ask what happens when Jan16 rolls into Mar16? Say for example Mar was 100 points higher than Jan on expiry, are there any extra costs for the roll and what happens the 100 point difference?

Thanks

ixus

"Oil glut deepens with 100m barrels at sea"

Google the above to escape the FT paywall.

Insight to tanker expenses etc.

Thargor

100m barrels is only about 24 hours usage though.

ixus

According to article (which i assume you read before commenting), it is 50days of North Sea production. It has a material impact on the flat price and calendars.

I see no reason to be dismissive.

Thargor

Its still barely 24 hours usage, any pick up in demand and it will evaporate, when the pickup comes is the question though. Most of that oil is probably owned by traders thinking they were buying the low.

ixus

I'd respond but it is clear you haven't read the article...

For ever odd

Buy oil tanker companies?

http://www.investopedia.com/articles/markets/082015/looking-invest-oil-tankers-try-these-3-stocks.asp

https://en.m.wikipedia.org/wiki/Category:Tanker_shipping_companies

Thargor

ixus wrote: »

I'd respond but it is clear you haven't read the article...

I don't particularly care if you respond or not I was just pointing out that a single days usage worth of any commodity is hardly a massive glut. Feel free to point out whatever awesome revelation is contained in that article that Im missing.

ixus

Thargor wrote: »

I don't particularly care if you respond or not I was just pointing out that a single days usage worth of any commodity is hardly a massive glut. Feel free to point out whatever awesome revelation is contained in that article that Im missing.

You are missing how to parse a sentence for a start. 100mln at sea does not imply a glut in itself, the sentence implies it adds to the glut. The article then explains how storage facilities are nearing capacity, which implies glut. It also gives some information that "Forever Odd" was interested in RE tanker rates.

Your insertion that a days supply would evaporate is incorrect. VLCC's take weeks to move location. Structurally, you don't just turn on/off the taps. It takes time.

Traders don't just buy and hold with gamble flat just goes up. They trade Contango.

Your comments indicate little to no knowledge of this.

Thargor

ixus wrote: »

Your insertion that a days supply would evaporate is incorrect. VLCC's take weeks to move location. Structurally, you don't just turn on/off the taps. It takes time.

:D:D

Ah you thought I meant it would literally evaporate, good one.

You are missing how to parse a sentence for a start.

Your comments indicate little to no knowledge of this.

Calm down there, all I said was one days supply at sea is nothing, China could buy it all for a whole 10 days worth of reserves when they finish their next round of oil storage construction.

For ever odd

Oil Storage construction is a seriously slow business, for the simple reason, if it goes wrong.... Boom! It seldom comes in on time, and when it does come online, it could take some time before it reaches full operational status.

This is a general rule of thumb.

ixus

http://www.zerohedge.com/news/2015-11-12/something-very-strange-taking-place-coast-galveston

Some additional info.

ixus

IEA monthly report :

https://www.iea.org/oilmarketreport/omrpublic/

Cuts demand outlook for next year with a mild winter ahead and supplies still building.

Global GDP starting to falter.

Commodity indices at 1999 levels.

Equities are only holding on central banker expectations. Earnings season was poor for most apart from a few big ones from google, amazon etc.

ixus

Brent expires today. The dec jan calendar has had a daily range of approx 10 pts. Yesterday it sold off 30. Today it has rallied 60 so far.

arrowloopboy

Bought the same again a couple hours ago ,don't have the time or capabilities to comment on some of the heated ''discussion'' / dick measuring going on here:D.
These are very simple/uncomplicated trades(the only type I take),I think oil is currently cheap ,I have time/money ,all we need is a cut in supply,or, an '' event'' .

For ever odd

ixus wrote: »

Brent expires today. The dec jan calendar has had a daily range of approx 10 pts. Yesterday it sold off 30. Today it has rallied 60 so far.

Spreadbetter rolled it yesterday, that's why I said "Thursday 7.30". Currently showing a spread of 0.5 between Jan/ Feb.

As I said "the devil is in the detail". It would be hard to take this trade on, with a Spreadbetter. Still, I got something out of it.

If you took it on and made a bob, good for you!

Do you think it was for the reasons I stated, or was it some other reason?

For ever odd

arrowloopboy wrote: »

Bought the same again a couple hours ago ,don't have the time or capabilities to comment on some of the heated ''discussion'' / dick measuring going on here:D.
These are very simple/uncomplicated trades(the only type I take),I think oil is currently cheap ,I have time/money ,all we need is a cut in supply,or, an '' event'' .

We know Arrow,and that's why we love you!!!

ixus

No reason, its random. Corrected 30/40 into expiry in low volume. Just pointing out how it goes from a tight range to 4/5 times it into expiry.

For ever odd

Enjoy the weekend lads!