The ACD Method

Maverick74 · Apr 11, 2014

Crude oil failing at the monthly and quarterly A up. WTI/Brent spread getting awfully close to parity again.

I'm going to post a quiz question and I'll provide the answer after the market close. In the above sentence I provided some useful info. Based on your knowledge and the info I posted above, give me what you think is an optimal trade setup and why? No googling for the answer. Use only your notes from the previous 1400 pages of this thread. The answer is in there.

kinggyppo · Apr 11, 2014

Maverick74 said:
Crude oil failing at the monthly and quarterly A up. WTI/Brent spread getting awfully close to parity again.

I'm going to post a quiz question and I'll provide the answer after the market close. In the above sentence I provided some useful info. Based on your knowledge and the info I posted above, give me what you think is an optimal trade setup and why? No googling for the answer. Use only your notes from the previous 1400 pages of this thread. The answer is in there.

I will go another way since some are probably afraid to be wrong; I am wrong all the time.
I would buy spy-uso*5 trading at -5 down now quite a bit on a % basis. Definitely a divergence or oil is defying gravity based on correlation with es. Not sure what wti/brent at parity means.

wow12 · Apr 11, 2014

kinggyppo said:
I will go another way since some are probably afraid to be wrong; I am wrong all the time.
I would buy spy-uso*5 trading at -5 down now quite a bit on a % basis. Definitely a divergence or oil is defying gravity based on correlation with es. Not sure what wti/brent at parity means.

i would go with what king say's lol

i'm still looking to expand my product range at the moment only currencies pair's which isn't good

if i had to guess might totally be wrong by hundred Kilometers but i would have said Heating oil

newbie alert !!!

trader31 · Apr 11, 2014

Maverick74 said:
Crude oil failing at the monthly and quarterly A up. WTI/Brent spread getting awfully close to parity again.

I'm going to post a quiz question and I'll provide the answer after the market close. In the above sentence I provided some useful info. Based on your knowledge and the info I posted above, give me what you think is an optimal trade setup and why? No googling for the answer. Use only your notes from the previous 1400 pages of this thread. The answer is in there.

Just a guess, but based on this information, go short the WTI/Brent spread (with a proper sell pattern) with stop above monthly or quarterly (depending on my time frame for the trade). The hope would be that if WTI fails at these levels and weakens and given the spread is very tight at the moment you would capture the benefit of WTI spread widening vs brent (by WTI selling off relative to Brent).

justrading · Apr 11, 2014

Maverick74 said:
Crude oil failing at the monthly and quarterly A up. WTI/Brent spread getting awfully close to parity again.

I'm going to post a quiz question and I'll provide the answer after the market close. In the above sentence I provided some useful info. Based on your knowledge and the info I posted above, give me what you think is an optimal trade setup and why? No googling for the answer. Use only your notes from the previous 1400 pages of this thread. The answer is in there.

Really can't play this because I haven't a clue about the spread, which from memory can be $8 to $15 or something, but more importantly I have a confirmed monthly A up and it's heading to the Quarterly which is near the 3rd March high for me. So that coupled with a strong 5 day number line means I'd be looking at a long entry for CL.

If it's failing for you and the spread is tight, I'd look for a reversion to mean on the spread, unless there is a reason for WTI to be equally weak.

BTW, I haven't traded for the last 3 weeks due to personal stuff (not bad mind), but have with great effort maintained my data. As a public service, when you are in the mood tell us how you never take a vacation because you have to maintain your data.

running_bare · Apr 11, 2014

Already long WTI/Brent the spread from the -ve teens

Also long RB/Brent

What do I win ?

Maverick74 said:
Crude oil failing at the monthly and quarterly A up. WTI/Brent spread getting awfully close to parity again.

I'm going to post a quiz question and I'll provide the answer after the market close. In the above sentence I provided some useful info. Based on your knowledge and the info I posted above, give me what you think is an optimal trade setup and why? No googling for the answer. Use only your notes from the previous 1400 pages of this thread. The answer is in there.

Robert Yanks · Apr 12, 2014

Maverick74 said:
Crude oil failing at the monthly and quarterly A up. WTI/Brent spread getting awfully close to parity again.

I'm going to post a quiz question and I'll provide the answer after the market close. In the above sentence I provided some useful info. Based on your knowledge and the info I posted above, give me what you think is an optimal trade setup and why? No googling for the answer. Use only your notes from the previous 1400 pages of this thread. The answer is in there.

Hello Mav,

Spreads are new to this green horn. I did read your Spreads posts back in Nov as I assembled them so I'll re-read later today. Can we use BNO as a sub? (Just looked and guess not as my Mo A up is 43.22 and my Qtr A up is 44. That is, they are not both failing at the A ups)

Maverick74 · Apr 13, 2014

Maverick74 said:
Crude oil failing at the monthly and quarterly A up. WTI/Brent spread getting awfully close to parity again.

I'm going to post a quiz question and I'll provide the answer after the market close. In the above sentence I provided some useful info. Based on your knowledge and the info I posted above, give me what you think is an optimal trade setup and why? No googling for the answer. Use only your notes from the previous 1400 pages of this thread. The answer is in there.

Here is the answer to the quiz. Crude failed at my monthly and QTR A up. So an opportunity has been identified. But how to play this? I've talked about the correlation between strength in WTI and the narrowing of the WTI/Brent spread. Currently the spread is trading almost at parity (means zero). A more optimal trade rather then selling Crude at the QTR or monthly A up, would be to go short the WTI/Brent spread. I'm posting both charts. As you can see the spread also failed at the monthly A up. The spread allows you to "express" your view of shorting crude but with better risk control.

eurusdzn · Apr 13, 2014

Thats a nice trade idea to put out there. Thanks. I am fretting over your term "parity" and am wondering if it is important. if i include about 400 days i can see the spread at parity but it seems to depend on when you start.
Regardless where one "starts", the spread appears to be at a major level visited 3x in the last couple years. Seems to be 7 or 8 % historical target here.
As a home gamer I dont have the feed to ICE for Brent so BNO and USL(bad rolls minimized) seem OK for longer term to express this idea.

Regarding parity...if i include 750ish days then Brent is stonger and there is an offset or
drift, and, that major support is at a 15% level. Hope this makes sense. I dont know
if i am getting the importance of parity. Thanks again.

ps: Does our summer seasonal driving habbits drive Brent much in your experience?

Maverick74 · Apr 14, 2014

eurusdzn said:
Thats a nice trade idea to put out there. Thanks. I am fretting over your term "parity" and am wondering if it is important. if i include about 400 days i can see the spread at parity but it seems to depend on when you start.
Regardless where one "starts", the spread appears to be at a major level visited 3x in the last couple years. Seems to be 7 or 8 % historical target here.
As a home gamer I dont have the feed to ICE for Brent so BNO and USL(bad rolls minimized) seem OK for longer term to express this idea.

Regarding parity...if i include 750ish days then Brent is stonger and there is an offset or
drift, and, that major support is at a 15% level. Hope this makes sense. I dont know
if i am getting the importance of parity. Thanks again.

ps: Does our summer seasonal driving habbits drive Brent much in your experience?

Parity simply refers to two products being equal as in the spread trading flat. It doesn't have any significance. BTW, I'm not implying these two should trade at parity. In fact they should not. The two crudes are similar but their composition is different. They also have different storage and transport costs. Summer driving season has very little effect on brent vs crude but it also has little effect on WTI. The increase in demand for gasoline is offset by the decrease in demand for heating oil. The issue driving this spread are the supplies coming from the various shale plays and supply constraints in Europe tied to the middle east.