its interesting and probably a sign that no one commenting or trading the crack spread manually except for a few who have already commented.
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Charting and trading the 1:1 crack spread
- Thread starter jokertrader
- Start date
its interesting and probably a sign that no one commenting or trading the crack spread manually except for a few who have already commented.
I trade the cracks. You really need to understand the fundamentals. Don't f*ck with the charts. You are not going to "chart" your way to profits here. You really need to understand the seasonality in these spreads. You better have real time news when refiners go down because these spreads will rip your ass open if you are even seconds late to the news. You want to build a model on refinery margins so you at least have some idea when it's economical to crack and when it's not. Your line plots are not going to help you there.
If I can offer some advice, start with heating oil cracks, much less volatile. And start with swing trades. Don't trade the delivery months. If you are absolutely dead set on looking at a damn chart, watch the heating oil flat price charts and the heating oil calendars.
Also scale into your positions meaning you will want to be able to trade at least 3 lots. I would recommend at least a 25k account to trade that size.
Mav thanks for your comment. Certainly some good points.. just to be clear on the delivery month.. so if i am trading the HOECLE Sept 2018.. do not trade this in Sept (first delivery is between 11 Sep 2018 and 27 Sep 2018) since its too close to delivery and could have some wild action?
or am i missing the whole point? are there certain months that are delivery? (sorry for such a newbe question)
and i will certainly look at modeling refinery margins and read up on it
or am i missing the whole point? are there certain months that are delivery? (sorry for such a newbe question)
and i will certainly look at modeling refinery margins and read up on it
Mav thanks for your comment. Certainly some good points.. just to be clear on the delivery month.. so if i am trading the HOECLE Sept 2018.. do not trade this in Sept (first delivery is between 11 Sep 2018 and 27 Sep 2018) since its too close to delivery and could have some wild action?
or am i missing the whole point? are there certain months that are delivery? (sorry for such a newbe question)
and i will certainly look at modeling refinery margins and read up on it
The delivery month is whatever the front month contract is. Keep in mind, the "true" crack spread is tricky. It's technically split. For example, Sept CL and Oct HO. The reason for this is in the physical market you have to buy the oil first and then arrange for pipeline space to move the molecules from Cushing to the refiner. Which is not as straightforward as it sounds. Most of the light oil out of Cushing has an east coast destination i.e NY Harbor, not the gulf. The gulf coast refiners crack the heavier oils from Canada, Mexico and imports.
The exchange traded spread I believe uses same month. So for example, oil has a different delivery period then Gasoline and Heating oil. Oil is delivered into the 3rd wednesday of the month. HO and RB is the last business day of the month. So there is usually a week or so of lag time which gets traded out through the swap market.