RBOB Crack Spreads

BMM:

No, that's fine, there are two ways of doing these spreads: you can do the exchange-supported implieds, or you can leg them.

This is what I said earlier:
"ICE also has a Gas/Oil versus Brent Crude crack spread that is exchange-supported, but unlike the U.S. we almost always leg those manually for proprietary reasons."

That spread you refer to in your post with the link is the exchange-supported implied, and as I mentioned our preference with the ICE Gas/Oil Crack is to build those positions using automated spread tools by scaling in 1:1 increments for proprietary reasons. 4:3 is ultimately the correct ratio, but to get there our preference is to leg 1:1 twice and then a 2:1.

On the Nymex exchange, however, the opposite is usually true: we use the exchange-supported implied spread products for both the heating oil cracks and the RBOB cracks.
 
Hi there,

I'm not having much luck finding details on the CME site about the implied-spread contracts. Are these distinct instruments...? Do you have a link?

I'm curious what the spread is doing today. It's just really striking to me that June crude is down about 1% today, while June heating oil is up 0.7%. Any thought whether that will reverse?
 
CME Group >> Market Data >> Spreads >> Energy

Choose the more common name physical products

Different charting packages have different symbology for exchange-supported implied spreads, for example, on CQG, the front month RBOB Crack is RBECLEM0

Yes, there are many many many different spread combinations - that's part of the beauty in it. Pure Love.
 
This crack spread stuff seems too easy... Put this paper trade on last night just to get a feel for what would happen (after noticing that the yearly trend is for the spread to be widest mid-late May). All legs are positive right now.

I can see how you have many satisfied clients booking $ every day.
 

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You are now promoted to "super"starfishprime.

RBOB Crack will fade away about October-ish when the refinery runs get changed over, and then we will start trading the Heating Oil Cracks. Myself and a few clients trade the ICE Gas/Oil Brent Crack year-round.

There are alot of idiots who think you can't spread trade effectively out of retail-oriented accounts and commission structures - I have several clients who net over 75% of their monthly profits using quite modest Interactive Brokers accounts.
You just have to tweak your choice of market instruments and your trading models. I don't necessarily view high frequency trading as a positive.
 
bone, I finally got around to creating a charting system to view these spreads in my preferred environment.

I've been watching the price action for a few days now and have noticed a recurring event on RB-CL.

The bid/ask will basically "stop" or "hang" at a certain price, and it will not go past that price. However, once it does, the spread will move quite a bit. I feel as if these are a type of "iceberg" order that someone like a refiner is putting on. They keep buying/selling at that price and then once they've bought/sold all they need there is no more price support, thus the large moves.

I haven't had time to further investigate this yet due to school starting up again, but does this occur on the other spreads (HO-CL, and the other expiries)? Do you have any other information on these events?

The attached chart is generated by connecting with the Zen-Fire API and then sending the data to NinjaTrader. The chart is a 30 second chart of the RB-CL G1 bid and ask, and you can see one of these events starting around 11am (1pm EST) and the price finally breaks around 11:18am.

One other quick question: do these instruments exhibit normal support and resistance tendencies? Or is the price action more fundamental?
 

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Thanks, starfish. Clients continue to perform very well in the energy space.

On Wednesdays, it is all about the supply and demand figures from the DOE-API reports.

From the Schork Report this Monday:

"Not only are we seeing high levels of imports, current
inventories at PADD 5 are holding steady relative to last
year: crude oil storage stands 1.82% above last year;
RBOB inventories are 4.73% higher YoY; distillate
inventories are 13.11% higher; heating oil inventories are
22.26% higher; and jet fuel stocks are 11.29% higher
than last year.
Given how high supplies and imports are, it should not
come as a surprise that refiner demand is muted: refiner
net input of crude oil in PADD 5 stands just 0.08% above
last year and 9.88% below the 2004-08 average."

IMO, fundamentals drive the overall directional trend and bias in the market, and technicals determine the price levels of interest in terms of support and resistance.

Your discovery regarding iceberg order flow is spot-on; lots of scale orders and automated order injection. The actual Nymex RBOB contract order book as a standalone instrument is quite thin with a rather wide bid/ask spread at times. The proof appears when you look at the implied spread volume (RBCL) executed at each price level - it is usually a very different picture than the live working bid and offer order size.
 
Bone, thank you for the quick response.

There are a few other things I'd like to ask you but I don't want to flood you with questions.

However, there is one thing that has been in the back of my mind for a few months now.

I've attached a picture describing the issue. Basically, if you take the RB prices and CL prices and combine them to get what the spread should be, there is often a difference, especially in the off-hours, like in the middle of the night.

In the example, the calculated RB-CL bid should be 13.45, which is exactly what the spread shows. The calculated ask should be 13.483, but the actual spread ask is 13.59.

From reading CME/NYMEX literature, I was led to believe the RB/CL orders would be "combined" to create an implied order at 13.48 to keep everything in check.

Since that is not the case, I'm wondering, does my platform only show the non-implied orders? Is it even possible to tell from this data?

From my short watching period (couple of months), I've only seen these calculated values below the actual spread values. It rarely (if ever) shows the calculated values above the spread.

I've thought up some ways to try and take advantage of this, such as placing a spread offer at 13.58 and wait until it gets filled, and the leg out via the individual contracts at the better calculated ask. My only concern is whether or not the favorable prices would disappear due to the implied matching functionality.

Can you please shed some light on this anomaly?
 

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On TT, for example, you can enable an order ticket setting to include implied pricing, which you definitely should do. You want to both chart and configure your execution platform order ticket for the actual exchange-supported spread. Do not chart the synthetic combination of the two - not realistic.

You do not, under any circumstances, want to leg out of either a HO or an RBOB spread. Might as well scalp, because you will get flipped or run over directionally in the process. You will find that the edge you gain legging in one instance will get more than offset by the butchery you endure the next time around. Seriously. Not worth it.
 
Any ideas why the cracks have lost touch with reality? The bid/ask spread has jumped to almost 10 ticks and its paper thin. Its like since this whole WTI/Brent debacle noone cares about the products. We are trading the march gas crack and less than 5000 contracts have traded today?! Any thoughts as to whats going on and when it will correct?
 
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