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Home / Futures Blog / Market Spotlight: RBOB Gasoline

Market Spotlight: RBOB Gasoline

November 22, 2013 by Don DeBartolo

gasoline

RBOB is an acronym for “Reformulated Gasoline Blendstock for Oxygenate Blending”.

Gasoline is a complex mixture of hundreds of lighter liquid hydrocarbons and is used chiefly as a fuel for internal-combustion engines. Petroleum crude, or crude oil, is still the most economical source of gasoline with refineries turning more than half of every barrel of crude oil into gasoline.

Octane is a measure of a gasoline’s ability to resist pinging or knocking noise from an engine. Most gasoline stations offer three octane grades of unleaded fuel – regular at 87 (R+M)/2, mid-grade at 89 (R+M)/2, and premium at 93 (R+M)/2. Additional refining steps are needed to increase the octane, which increases the retail price. This does not make the gasoline any cleaner or better, but yields a different blend of hydrocarbons that burn more slowly.

In an attempt to improve air quality and reduce harmful emissions from internal combustion engines, Congress in 1990 amended the Clean Air Act to mandate the addition of ethanol to gasoline. Some 2 billion gallons of ethanol are now added to gasoline each year in the U.S. The most common blend is E10, which contains 10% ethanol and 90% gasoline. Auto manufacturers have approved that mixture for use in all U.S. vehicles. Ethanol is an alcohol-based fuel produced by fermenting and distilling crops such as corn, barley, wheat and sugar.

The new popularity of RBOB in the exchanges owes much of its success to state legislation banning gasoline with MTBE. This chemical was found in unleaded gasoline and posed a threat for people and wildlife because it polluted groundwater sources. As a result, RBOB, which does not contain MTBE, has quickly grown in popularity with futures traders, and it has also become the new benchmark gasoline contract.

RBOB futures and options previously traded on the New York Mercantile Exchange (NYMEX) until 2008 when the CME group acquired NYMEX Holdings. The electronic contract on Globex trades from 5:00 PM CT to 4:00 PM CT, Sunday through Friday.

Additional RBOB contracts trade on CME Clear Port, a set of flexible clearing services open to OTC market participants, as well as on the Intercontinental Exchange (ICE) after it acquired the International Petroleum Exchange (IPE) in 2001.

One contract unit for RBOB futures is 42,000 gallons. The most common contract symbol is RB.

The contract is priced in U.S. dollars and cents per gallon. The futures contract price quotation is $0.0001 per gallon. The previous settlement price for January 2014 RBOB (November 21, 2013) was 2.7191. The next price movement or “tick” after 2.7191 upward is 2.7192, followed by 2.7193. Each tick is $4.20. A full cent move, from 2.7191 to 2.7291 for example, is $420.

The performance bond or initial margin requirement to initiate one futures contract position is $5,830 (as of November 11, 2015). To control that futures position going forward the maintenance margin becomes $5,300 (as of November 11, 2015).

At the commencement of each trading day, there is a price fluctuation limit in effect for each contract month of the RBOB futures contract of $0.25 per gallon above or below the previous day’s settlement price for such contract month. If a market for any of the first three (3) contract months is bid or offered at the upper or lower price fluctuation limit, as applicable, on CME Globex it will be considered a Triggering Event which will halt trading for a five (5) minute period in all contract months of the RBOB futures contract, as well as all contract months in all products cited in the Associated Products Appendix of rule 191.07.

The futures contract month listings are 36 consecutive months.

Trading in a current delivery month shall cease on the last business day of the month preceding the delivery month. The Last Trading Day for the January 2014 RBOB futures contract is December 31, for example.

Be aware that the Energy Information Administration (EIA) typically releases a weekly Energy Stocks report on Wednesdays at 9:30 AM CT.

Visit www.danielstrading.com for additional contract specifications and market information regarding the RBOB futures market.

Sources:
www.cmegroup.com
www.barchart.com

Risk Disclosure

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.

Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.

© 2023 StoneX Group Inc. All Rights Reserved

Filed Under: Trade Spotlight

About Don DeBartolo

Don C. DeBartolo is a Series 3 licensed broker registered with the National Futures Association (NFA). As a former arbitrage clerk in the S&P 500 futures pit at the Chicago Mercantile Exchange (CME), Don has floor trading experience. Taking his trade execution expertise and ability to navigate a fast-paced environment, Don transitioned to the brokerage side of the business. Since 2005, he has worked at Daniels Trading, a brokerage firm in the heart of the financial district in Chicago. His responsibilities as a broker include providing market analysis, trade execution, and money management to his clients around the world. In March 2010, he developed a formal trade advisory for clients of the firm seeking specific trade recommendations and subsequent risk management.

Due to his widespread proficiency and experience with the futures and commodity options markets, he is able to offer his clients timely insight, specialized trade recommendations, and educational information through various videos and writings.

Studying at Loyola University Chicago, Don discovered the international sport of rugby. Still today, he plays for the Chicago Griffins, a member of the highest league of rugby competition in the United States. Skill and discipline are two traits that carry over from the pitch to the trading screens.

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Risk Disclosure

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.

Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.

© 2023 StoneX Group Inc. All Rights Reserved

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