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Are there fundamental reasons why one would trade the 12 month June calendar vs the Dec calendar early in the year ( of course if close to June or past June then Dec is the only option or Sept but from my analysis I would like to stick to either the June or Dec)
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
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I'm not sure what your asking.
Z8-Z9 despite being further back is more liquid than M8-M9
ZMZ fly's tend to be higher than MZM flys so MM will tend to be lower than ZZ
I know people that prefer to do this as well. People who do, normally trade ZZ rather than MM.
Am traveling and thus dont have access to get data and chart..and would appreciate if someone could post the charts on the last several years on the ZZ ccontract to see whats the max divergence . Currently Z8-Z9 is at 4+.
What about Z10/Z11, Z11/12 etc..
2) What would be a similar year to compare this to in terns of fundamentals?
The goal of course would be to compare and enter short at the right time.. hoping for the correction and mean reversion
In 2003, it reversed but then shot up again (yellow line between 2003 and 2004)
In 2004, light blue line went well past 5 closer to 8 without much of a pulll back
Of course in 2013, 2014 difference is much higher as oil shot up much higer suddenly
So bottom line: just by historical patterns and seasonality cannot predict a pull back
Is that accurate?
THe question really based on fundamental reasons.. is there one or few years that had similiar pattern. Then we can see what happened to the price of oil in those years and whether we expect the same. if yes, then we can see what happened to the price of the spread and extrapolate to this year (of course the thesis is will behave the same as those years)
So what I would do if i had the data would be to first eliminate the years that are negative
Then eliminate the years where the difference was flat.. since even if that was true it will not hurt us in the trade
Then only compare the years which are similar to current or have moved either more or reversed
Then look at the price of oil for those years and what happened to the price of oil in those years and correlate that to the movement
Then form a thesis whether that will either repeat or is random
I am sure you are doing this but would be great if you can share your current analysis on the fly.. to see if there are any mean reverting opportunities...... (sorry wont ask any more this month)When i get back need to download my own data and will perform the analysis and maybe use this to compare
thnx
Yes, in the images I posted it represents an inverse correlation.
So as the USD strengthened, Oil price declined. As you point out USD has since weakened whilst Oil price has strengthened. So the relationship would seem to be holding.