I use IB as a back up broker with a small 30K$ account. I am not sure if they apply exact SPAN margins but they definitely don't use 2x outrights or even 1x outright margins. IMO they use just slightly more than exchange SPAN margins.
CL spreads
- Thread starter cdcaveman
- Start date
I use IB as a back up broker with a small 30K$ account. I am not sure if they apply exact SPAN margins but they definitely don't use 2x outrights or even 1x outright margins. IMO they use just slightly more than exchange SPAN margins.
Periods of pronounced and "exaggerated" backwardation (positive basis) and contango (negative basis) have become the norm since the new millennium. The CL and BRN contracts are fungible and physically delivered, and the present contract specifications are not perfect - far from it. There are finite limitations to rack space at Cushing, Oklahoma for example.
IB has good margins on spread trades. I have no prob with cash and margin accounts.
Commodity spreading is a very common trade. Most of them have seasonality. Natural gas is very typical calendar spread commodity.
But crude is a different story. It is a seasonal commodity (summer driving, some winter heating). But the US crude production has been steady and storage does not play much role in its supply. The backwardation we have been is mostly a trade thing.
The most active trades CL contracts are the first 6 months and all the December contracts. The December contracts are used for long-term proxy hedge for the remote year.
The CL has been bullish (or BS). So the front end is elevated. Not much interest in the remote contracts. So we see the steep declining term structure.
When CL was trading $35, I believe the CL term structure was upward carry curve. The market fundamentals have not changed much at all...
Absurd stupid traders
. Make money if you can. I like trading spreads, particularly CL spreads. Much safer than the outright....
But crude is a different story. It is a seasonal commodity (summer driving, some winter heating). But the US crude production has been steady and storage does not play much role in its supply. The backwardation we have been is mostly a trade thing.
The most active trades CL contracts are the first 6 months and all the December contracts. The December contracts are used for long-term proxy hedge for the remote year.
The CL has been bullish (or BS). So the front end is elevated. Not much interest in the remote contracts. So we see the steep declining term structure.
When CL was trading $35, I believe the CL term structure was upward carry curve. The market fundamentals have not changed much at all...
Absurd stupid traders
. Make money if you can. I like trading spreads, particularly CL spreads. Much safer than the outright....Can you confirm that they apply the correct exchange SPAN margin credits for spreads on an intraday basis ? If so, that would be fantastic.
One secret of the spread trading is the financial/physical convergence. Since the CL inventory is at close to historical record, there is no shortage of crude. When the front contract expires, financial contract and the physical crude oil converge. Then you have the front to 2nd contract roll. So near expiration, the front spread somehow disappears. This happened at least the two previous two months. This is going to happen again and again.
In another word, the $0.76 premium of Jun over July should drop or disappear. In general, it is a profitable trading opportunity to short this spread. You can do it again and again, with wider spread ($0.90 etc...).
There is some risk, but small....
In another word, the $0.76 premium of Jun over July should drop or disappear. In general, it is a profitable trading opportunity to short this spread. You can do it again and again, with wider spread ($0.90 etc...).
There is some risk, but small....
X-trader has an entire screen (matrix) for spread trading. You can set it up for 2nd and 3rd level spreads (butterfly and condor) trading. It also has an Autospreader, which I do not use much.
The liquidity is extremely good for CL. NG spreads are good too, but not as good as CL. So you have low margin, extremely good liquidity. Plus the good trading strategy, you are on your way to richness
The liquidity is extremely good for CL. NG spreads are good too, but not as good as CL. So you have low margin, extremely good liquidity. Plus the good trading strategy, you are on your way to richness