1 year apart OIL spread expansion and contraction:
see these WTI crude oil contracts MAY 2010 vs. MAY 2011 from March 25 3/25 to 4/5 April 5 , very interesting observations.
1) on 3/27 MAY11/MAY10 is : 83 -80 ( low point) that is too great discount for 1 year ahead , so buying MAY2010 at 83 level is safebet ( given it reached 90 1 month ago) , so any increase in MAY10 will push MAY11 contract ..
2) in 1 week MAY10 up from 80 to 87 so does MAY11 from 83 to 91 , so you can sell MAY11 at this 91 level around 4/5 or 4/6
3) for next trade on 4/6 , MAY11/MAY10 is 91 - 87 = $4 , you can expect May contract is peaked so MAY11/MAY10 BUY/SELL spread is good to enter here. If done so in 2 weeks by end of MAY10 contract it dropped to 87 to 81 where as MAY11 remained at 90 level , giving this spread trade $6 that is great low risk for 2 weeks .
3.2) only risk in that is if there is a war etc.. MAY10 may shoot up more than MAY11
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