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I am basing it on the original margin requirements, since I keep that amount (plus excess) tied up for the whole trade duration. I find this keeps me out of trouble, where using freed up margin to generate new trades got me into a bit of trouble back in December.
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals, U308 and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,059 since Dec 2013
Thanks Given: 4,410
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Demand was through the roof and cash prices went crazy last weekend. (Jan 3-7). Chicago traded $13.74 for the weekend block (Balance Month now $4.40), Algonquin/Boston traded $35 for last Tuesday ($14.5 BalMo) and New Jersey traded over $40 ($4.80 Balmo).
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals, U308 and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,059 since Dec 2013
Thanks Given: 4,410
Thanks Received: 10,226
Very difficult to know but I suspect that a large part of last week's sell off was caused (or at least started) by the enormous commodity index rolls taking place. I have seen estimates ranging from 35,000 to 100,000 contracts of NG selling/rebalancing.
If the indexes started rolling the 5th trading day of the month then OI is down 29k so far for those days. But that means that shorts also got out on the drop.
The spread has reduced from 7.00 to 4.50 and I have closed out the position for $2500 per spread profit.
The spread tested 4.00 twice but has held and I think it may widen again if CL gets a decent pullback.
I may consider re-entering if it gets back to 6.00 ish.
That’s nicely done. I read your post alerting of the trade but since I have never done a spread before and also was still reeling from NG hit, I didn’t bite.
By any chance are you monitoring the Heating Oil Feb-Apr 2014 spread which was up to 0.0379 today? Last January it went on to touch 0.06.
Edit:
Btw did you chart up the mar/dec13, 12, 11 spread to see how they reacted in the past? I am remote so cannot access the charts, but you need to be very cautious with these spreads as the market can flip contango to backwardation in a day and vice versa, with no warning, and even with v little happening in the front month!
I used to trade brent and wti cal spread futures and they were supposedly mean reverting (crude was far from though) but that trade blew a few years ago, and this was across white, red, green futures months. Mar/Jun/Sep/Dec mths were more volatile than others and often deviated away from the spreads trends either side. Just my 2 cents ie go careful!
Guys, one reason this thread has become so many pages is that sometimes we get off the topic (OT) of selling options on futures. I am just as guilty as others.
A new person coming here could say, "I don't want to read 288 pages" and miss out on good info.
Also your OT subject may be missed by someone who could use that info but who doesn't come here because they don't sell options on futures.
Check to see if your OT post could fit into another thread or if not, start a new thread in the appropriate folder.
Let's work together and keep the posts on topic. I promise to stay off my soapbox and stay on topic. Call me out if I don't.