From the June 2013 issue of Futures Magazine • Subscribe!

Energy leaders and followers

CME Group and ICE both specify a 1,000-barrel trading unit priced in dollars and cents per barrel. Observing the difference between the computed spread and the exchange’s official spread over time should give a trader a better idea of potential price changes in these more convenient spreads. On March 28, the computed crack spread was $17.596 vs. the CME Group spread of $18.048. The difference will vary continuously and can help the trader decide the direction of the traded spread.

A third choice for the heating oil-Brent spread is an exchange-traded fund (ETF). “Third option using ETFs” (below) shows the difference in prices from Jan. 2 though March 28, 2013. On March 28, the closing prices for the ETFs were $33.07 for the U.S. Diesel-Heating Oil Fund LP (UHN), and $83.17 for the U.S. Brent Fund (BNO). Historical and daily price data are available free for both ETFs from Yahoo! Finance. 

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