CL Spreads
- Thread starter shep1487
- Start date
The open interest can be found at the web site of the exchange where the contract is listed.
The exchange willnot break down the open interest by participant. For that you will have to go to the committment of traders (COT) report which is released every friday. I believe it published by the CFTC. It breaks down the open interest by paticipant (commercial vs non commercial). It can be extremely useful because it can give a hint on what participants may may do to a nearby spread. For example, if funds are long the nearby and there is little/ no chance of standing for delivery, the funds will be forced to roll their position ( usually into the following month but not always) and push the spread towards full carry.
With respect to crude spreads narrowing, I think that can be attributed to deliverable stocks in cushing being removed. This reduces the threat of delivery and compels the short to roll at a lesser carrying charge. The ability of commercials to remove or add to deliverable stocks gives them the ability to greatly influence a spread and therefore the direction of the flat price. I believe that this is how some of the nearby crude spreads traded as wide as $8 over the past 18 months. However the nearby spreads cannot continue to trade at those kinds of levels because it becomes too costly for the long. For example if a long was established at $75 and the position was rolled fro 1 year at $2/month the breakeven price at the end of the year would be $95, not really a very good proposition. Thus, spreads moving sigfnificantly beyond full carry threatens the viability of a contract.
The wheat contract has struggled with this for some time.
The above identifies two factors that will influence a spread, composition of the open interest and threat of delivery. There is more to it than that but it is a start. Hope it helps.
Regards, local.
The exchange willnot break down the open interest by participant. For that you will have to go to the committment of traders (COT) report which is released every friday. I believe it published by the CFTC. It breaks down the open interest by paticipant (commercial vs non commercial). It can be extremely useful because it can give a hint on what participants may may do to a nearby spread. For example, if funds are long the nearby and there is little/ no chance of standing for delivery, the funds will be forced to roll their position ( usually into the following month but not always) and push the spread towards full carry.
With respect to crude spreads narrowing, I think that can be attributed to deliverable stocks in cushing being removed. This reduces the threat of delivery and compels the short to roll at a lesser carrying charge. The ability of commercials to remove or add to deliverable stocks gives them the ability to greatly influence a spread and therefore the direction of the flat price. I believe that this is how some of the nearby crude spreads traded as wide as $8 over the past 18 months. However the nearby spreads cannot continue to trade at those kinds of levels because it becomes too costly for the long. For example if a long was established at $75 and the position was rolled fro 1 year at $2/month the breakeven price at the end of the year would be $95, not really a very good proposition. Thus, spreads moving sigfnificantly beyond full carry threatens the viability of a contract.
The wheat contract has struggled with this for some time.
The above identifies two factors that will influence a spread, composition of the open interest and threat of delivery. There is more to it than that but it is a start. Hope it helps.
Regards, local.
"i never see any volume in flys for energies"
I never traded them without legging it out.
I leg them using the standard implied two month calendar spreads and the occasional third or fourth month flat price futures fill. All kinds of volume in the front four calendar months in terms exchange supported spreads.
Think of it as 3-dimensional chess. A TT pro license helps but I usually leg them manually.
Works for Natty, Brent, Gas/Oil, Heating Oil, and RBOB also.
The road less travelled is wonderful. Zig when most folks are zagging.
I never traded them without legging it out.
I leg them using the standard implied two month calendar spreads and the occasional third or fourth month flat price futures fill. All kinds of volume in the front four calendar months in terms exchange supported spreads.
Think of it as 3-dimensional chess. A TT pro license helps but I usually leg them manually.
Works for Natty, Brent, Gas/Oil, Heating Oil, and RBOB also.
The road less travelled is wonderful. Zig when most folks are zagging.
"Fair value based on what?"
Well, if he's looking at the calendar spread value last month compared to the front month futures priced during the roll he's correct.
Problem is, at the same time in the roll and with the same sept. futures price ($77.50) the sept-oct calendar spread is trading at -32, whereas last month at this time the july futures were trading at $77.50 and the july-aug calendar was trading at -$1.40.
So, $1.10 higher than his FV.
The sticker is the COT - far less spec longs and ETF longs in the market, so less requirement to sell the calendar spread and roll the position.
Well, if he's looking at the calendar spread value last month compared to the front month futures priced during the roll he's correct.
Problem is, at the same time in the roll and with the same sept. futures price ($77.50) the sept-oct calendar spread is trading at -32, whereas last month at this time the july futures were trading at $77.50 and the july-aug calendar was trading at -$1.40.
So, $1.10 higher than his FV.
The sticker is the COT - far less spec longs and ETF longs in the market, so less requirement to sell the calendar spread and roll the position.
I've seen some variation of this type of thinking any number of times on E'trader -- the idea that risk has something to do with recent past price moves, or with whether the market appears to be in a "trend", or with one's own mental state... It doesn't. Once you're in the market, you're at risk, and it doesn't matter if the market has already moved up or down such-and-such amount. There's nothing "conservative" about trading futures or futures spreads. "Conservative" is holding T-bills.