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Multi Leg Part III - Crack Spread

In the petroleum industry, refineries are most concerned about hedging the difference between their input costs and output prices. Their profits are tied directly to the spread between the price of crude oil and the prices of refined products, gasoline and distillates (diesel and jet fuel). This spread is called Crack spread.

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Multi Leg Part II - Crush Spreads

The most popular inter commodity spreads involve the simultaneous execution of multiple futures positions designed to replicate the inputs and outputs of several real world product transformations or to hedge that production process by putting on the opposite spread. Examples of these are Crush and Crack spreads.

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Multi Leg Part I - Condor and Butterflies Spreads

After you get familiar with the basics of spread trading, you can start to explore more complex strategies that involve more than two legs. In the first part of this article we will focus on multi leg intra commodity spreads like Butterflies and later we will cover multi leg inter commodity spreads like Crack spread and Crush spreads.

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Commodity Futures Spread Strategy for September, 2014 - Buy LHV14-LCV14

This spread combines several conditions to create good trading opportunity.

  • 80% Win in last 15 years
  • Seasonal patterns correlation - All patterns up to 15 years have similar movement and correlation
  • Historical lows - Current year is moving around historical lows with nice space for profit
  • Possible to entry around strong support and use a small stop-loss
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Commodity Futures Spread Strategy for August, 2014 - Buy HOZ14-HOH15

This futures spread combines several conditions to create good trading opportunity.

  • 87% Win in last 15 years
  • Seasonal patterns correlation over 90%
  • Possible to entry around support and use a small stop-loss
  • Double bottom pattern
  • Low margin requirements
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Commodity Futures Spread Strategy for July, 2014 - Buy GOX14-GOZ14

This futures spread combines several conditions to create good trading opportunity.

  • 100% Win in last 20 years
  • Seasonal patterns correlation over 92%
  • Spread moves in a narrow range
  • Possible to entry at support and use a small stop-loss
  • Close legs with expected lower volatility
  • Long seasonal window - A lot of time for seasonality to kick in. Possibility to take profit earlier
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Commodity Futures Spread Strategy for June, 2014 - Buy SBV14-SBK15

This futures spread combines several conditions to create good trading opportunity.

  • 87% Win in last 15 years
  • High seasonal patterns correlation
  • Possible to entry around support and use a small stop-loss
  • Historical lows - Current year is moving around historical lows with nice space for profit
  • Long seasonal window - A lot of time for seasonality to kick in. Possibility to take profit earlier
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Spread Trading Experience (user contribution)

MATtrader, one of our users shared his spread trading experience.

This article was rewarded with one month free access, write your own and get it too.

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