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Well it worked good for 3 days. On the fourth, it crashed and burned, over and over again. Ended day down almost $900. One critical point I missed, what looked like a great entry/exit on minute chart did not on other time charts.
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,057 since Dec 2013
Thanks Given: 4,409
Thanks Received: 10,225
More Random Musings of a Spread Trader
Crude curve is still in relatively steep contango. CLN5 trading approx $6 below CLZ8 (which is month 42) so ~15c/month. Normally you would expect contango to be steepest at the front, and hence butterflies to be negative. Well interesting last night the z5/z6/z7 butterfly settled -1c and the z6/z7/z8 butterfly settled +10c. The last time either of these spreads settled positive was back in Oct/Nov 2014 when crude was significantly higher than here, and of course was backwardated.
The following scatter plot shows graphically how out of whack this is.
Note CL_18 is currently CLZ6, CL_30 is CLZ7, CL_18 is CLZ8
Full Disclosure:- I am slightly short this Butterfly but do have hedges on against it
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,057 since Dec 2013
Thanks Given: 4,409
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I got thumped yesterday. I do a lot of quant/statistical & mean-reverting trades and when the market is out of whack with my models (eg my chart above), it normally means some pain for me. The one upside to taking that pain, is that (at least for the mean reverting trades) it's an opportunity to add more which inevitably means more profit once it does revert.
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,057 since Dec 2013
Thanks Given: 4,409
Thanks Received: 10,225
From a price / risk management perspective, physical oil being sold into the market shouldn't effect prices. That oil is all hedged with other instruments and as they oil is sold, those hedges are unwound. -1+1 = 0. Hence it is my belief that this is not what is driving prices lower.
From a fundamental perspective, physical oil being sold into the market makes an already bearish supply/demand picture look even more bearish. I believe that it's other people's perception of these fundamentals, that is the reason they start selling, which is what drives prices lower.
Maybe just semantics, but in reality a different cause-effect chain.
For what its worth the larger VLCC's have max sizes of 2.2 million barrels, not 2 million. ULCCs are even larger, and are actually what is often used for floating storage.
While I don't prescribe to the "physical speculators supporting the price of oil theory" if I was a directional crude trader (and I am not) I would agree with @ron99 and be looking for a drop in prices from here. Not only am I surprised crude has bounced as much as it has, I'm even more surprised how flat the curve has become.
I like trading crude, can't trade full time, so I trade for an hour in the early mornings before work. I know this is only my 2nd post (very sad) but recently reading Big Mike's mention of the silent majority not contributing, I thought I would try to do my part in changing that- even though i feel i don't have a lot to add. I have always scalped in the mornings ( always with mixed results) but reading many posts about trading the bigger picture has got me to start thinking about just trying to position myself and going with the longer term movements. In light of that I've been watching the 30 minute chart and I just look for areas where buyers have bought and turned price and areas where sellers have sold from and turned price, and as these areas of support and resistance are touched again I look for reaction around them but I wait for price also to hold at an area before entering, seems simple
I am looking at one such area now on the 30 minute chart, where buyers have bought the 59.35 range many times recently and sellers have sold the 59.00 range. Seeing friday's close is just below 59.00 has me watching this closely. for me to go short here I would need to see more of a holding of price here- and then a continuation downward. For me to be a buyer i would need to see price get about the 59.35 area and hold this. Seems simplistic but thats me, nothing but a few lines on my chart and not entering until price holds an area.