trader_dante
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I used to play the spread between the two when it was out of line.
I used to trade WTI very heavily and but would only look at Brent for reference and it's been a couple of years since I have done this so I can't help much more, sorry.
Thanks for the reply trader_dante. I'm trying to find a tradable relationship between the two. Considering the WTI is now below Brent (unlike last week) it looks like any relationship will not be simple...
sorry but that is a bit of an ambiguous post - this spread trades almost like an outright intraday - infact ICE even launched a contract for it a while back...
You might as well say "I trade the FTSE when it goes out of line" - tis a completely meaningless statement.
I should add that I don't trade this spread but I'd hope that by 'trying to find a relationship' you're not simply sifting through historical price data but are looking at the fundamentals of these markets too.
this site may be of some use: TheOilTrader.com
the subscription part provides analysis of the inventory data and its market impact - that alone ought to be of some use on a Wednesday afternoon.
Good luck with it
Hi there,
I've been asked to try find a "tradable relationship" between Brent and WTI as well. As I'm a novice to the whole market and subject I don't know really where to start. I've been looking at some info on refining margines, the basis etc, but still am clueless. Will be grateful for any help.
Thanks.
I've been asked to try find a "tradable relationship" between Brent and WTI as well. As I'm a novice to the whole market and subject I don't know really where to start. I've been looking at some info on refining margines, the basis etc, but still am clueless. Will be grateful for any help.
Thanks.
trader_dante
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If I remember correctly one would trade at a premium to the other for most of the time and keep a close relationship in price. So if Brent traded with a 1.00 premium to Nymex for a long period I would look to play it when Nymex then traded a 1.00 premium above Brent. This was in the early days when I didn't know what I was doing but on reflection it worked well.
TWI
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This is an actively traded spread and has had some huge moves in the last year. What exactly are you looking to find. Just chart the spread of any month in both and then look to trade it like you trade anything else. It is 1:1 ratio each is 1000 barrels. Why do you want to look at refining margins, that is more to do with rbob gasoline/heating oil or gasoil if you look at these you are dealing with crack spreads. The Brent WTI spread will tend to move on logisitcal issues such as when the Canadian pipeline went down sending WTI up far more aggresssively than Brent..it is quite simple really
Maybe we're not talking about the same thing... The objective is to trade apples for oranges 
WTI for Brent. As I said I'm a total novice to the field and the person who asked me to find the relationship mentioned something about refining margins, calculating the basis etc.
But thanks for your reply.
WTI for Brent. As I said I'm a total novice to the field and the person who asked me to find the relationship mentioned something about refining margins, calculating the basis etc. But thanks for your reply.
gonnamakeit
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margin is approx 2000-4000 dollars per trade
Its a combination of both legs just added up.
Hope that helps
Its a combination of both legs just added up.
Hope that helps
Maybe of some help..
This thread has been sleep for while, so maybe Richie, you found all the answers by now..
I agree completely with what TWI has said above. I dont normally trade futures .. Im here to learn.. but there is a VERY simple way to trade this spread with rolling contracts on the MT4 platform...(do I hear sighs of derision from the senior members?..LoL) But its even simple to automate the trade there..Its very old classic pair trade..Not sure if I can mention an FSA regulated broker by name? anyway..a well known name. But if you want name pM me. - $100 a trade - thats a 10cents move before you cover costs..average daily range during tradable hours (07.15'-19.30 London time)...in last week ? about 90 cents - averge WTI premium? $1.75. Some analysts suggest the spread may invert later in year... it was inverted in July..Also some caution about volitility during Non trading hours. No access to ICE (Brent) Contract but Nymex WTI trades on...Mmmmm LoL
Finally the good/bad news is that as TWI noted..the volitility on the daily close has been increasing dramatically year on year infct since 1995.. So Good luck
This thread has been sleep for while, so maybe Richie, you found all the answers by now..
I agree completely with what TWI has said above. I dont normally trade futures .. Im here to learn.. but there is a VERY simple way to trade this spread with rolling contracts on the MT4 platform...(do I hear sighs of derision from the senior members?..LoL) But its even simple to automate the trade there..Its very old classic pair trade..Not sure if I can mention an FSA regulated broker by name? anyway..a well known name. But if you want name pM me. - $100 a trade - thats a 10cents move before you cover costs..average daily range during tradable hours (07.15'-19.30 London time)...in last week ? about 90 cents - averge WTI premium? $1.75. Some analysts suggest the spread may invert later in year... it was inverted in July..Also some caution about volitility during Non trading hours. No access to ICE (Brent) Contract but Nymex WTI trades on...Mmmmm LoL
Finally the good/bad news is that as TWI noted..the volitility on the daily close has been increasing dramatically year on year infct since 1995.. So Good luck
Papa Lazarou
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I believe there is an 85% offsettability between ICE WTI and ICE Brent. i.e. 85% reduction of the margin rate charged for an outright flatprice trade in, say, Brent.
To confirm the tradable relationship between the two. Keeping it simple, fundamentally the relationship is geographic. WTI is used as a marker in the states, and Brent is used as a marker in Europe. If something happens in the states that has no impact on deliveries in Europe then this will affect the spread.
As 'TWI' says, it's quite simple really.
Hope that helps.
To confirm the tradable relationship between the two. Keeping it simple, fundamentally the relationship is geographic. WTI is used as a marker in the states, and Brent is used as a marker in Europe. If something happens in the states that has no impact on deliveries in Europe then this will affect the spread.
As 'TWI' says, it's quite simple really.
Hope that helps.
Papa Lazarou
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Hi Stuey, just for reference when we talk about that contract here in the uk we'll always quote the WTI first.
So right this second the "WTI / Brent spread" is trading -3.69 (i.e. WTI discount to brent). If you bought the contract on ICE, you'd be buying the WTI, selling the Brent.
As for a buy. It does seem cheap doesn't it, but also it seems in free fall too, so going to wait until confirmtion that the downside is done!
Hope that helps.
So right this second the "WTI / Brent spread" is trading -3.69 (i.e. WTI discount to brent). If you bought the contract on ICE, you'd be buying the WTI, selling the Brent.
As for a buy. It does seem cheap doesn't it, but also it seems in free fall too, so going to wait until confirmtion that the downside is done!
Hope that helps.
Papa Lazarou
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very much depends on the index. the GSCI are 'supposed' to start the roll of their positions on the 5th business day of the month.
Thanks Papa Lazarou, that's what I thought. There was a massive move in the WTI calendar yesterday so thought they may have started earlier!