Look at the breakdown in heating oil today! We are hitting on 15 year low prices in this spread relationship. Our position is really moving in our direction. At the time of this update the spread position traded last @ -.1332 (+$1898 before fees.) I wanted to provide an update on our position and see where we may go from here. If you need assistance in this position please reach out to me.
Below, I have included a screen shot of the current DT Pro chart showing the levels as well as a seasonal algo chart showing the historical price movement of the spread. We have a trade in our favor. It is time to evaluate a few things. How many positions are we holding? What is our current risk on the trade? Do we want to ring the register? Is there still room to go? Where do I put my stop? These are all questions you need to ask yourself when you are writing up the trade and during all stages of the trade.
I would suggest at the very least we adjust your risk on the trade or even lock in some type of profit on this move. This is always a good practice to follow. Never let a winner turn into a loser. If you are holding more than one spread, which I often encourage if you are able to do so, as that is a major reason we look to trade spreads, reduced margins, reduced volatility from outright futures, etc. I would take off half or ¾ of your position at this level and leaving a small position on to see if we still have more room to run lower. This keeps you in the game and prevents “FOMO” Fear Of Missing Out” on any further movement. Make it small enough in the event we do retrace back up from here you won’t be upset. We are about 2 weeks out from the January leg expiring on this trade, so there is still time for this to break lower, but not enough time to have wide risk still in play, in my opinion.
Spread: Short Jan Heating Oil: Long June Heating Oil
Yesterday we had a nice move looking to challenge the -1200 level and today we really had a breakdown in the Heating Oil market which carried over to the spread with it reach a low of -.1355 (+$1995 per spread before fees). Last @ -.1332
In addition, to this update I have included the original update from 12/1/15 explaining the trade and the setup when I sent out the update.
Daily Chart of Spread 12/11/15
Historical Prices and Seasonal Pattern 12/1/15
Spread 1: Heating Oil
Entry: Sell Jan Heating Oil – Buy June Heating Oil (exchange accepted)
Entry: -.0880 spread price
Risk: -.0680 spread price (200 ticks or -$840 before fees)
Target: looking to hit and break historical prices of -.1200 (+1344 before fees)
Margin: $385 per spread
We are looking to short this Heating Oil spread ahead of its seasonal buying window. In the 2nd week of December historically this spread has made a move higher. This could be due to several fundamental reasons of weather, storage, etc. I think this year with the warmer weather and the higher oil supplies across the board in all oil/gas markets, I like for this to continue to break lower and push below its historical averages. The spread move sharply in the direction I was wanting to sell today, so I am putting my entry point above the current market prices as we could see some small support here.
Daily Chart 12/1/15
Historical Prices and Seasonal Pattern 12/1/15
dt Pro Futures Trading Software Demo
Daniels Trading’s dedication to providing the premier futures trading software in the industry was driven by our relentless pursuit of satisfying the needs of active traders and offering a trading platform that would truly set us apart in the industry. The result is our dt Pro.
STOP ORDERS DO NOT NECESSARILY LIMIT YOUR LOSS TO THE STOP PRICE BECAUSE STOP ORDERS, IF THE PRICE IS HIT, BECOME MARKET ORDERS AND, DEPENDING ON MARKET CONDITIONS, THE ACTUAL FILL PRICE CAN BE DIFFERENT FROM THE STOP PRICE. IF A MARKET REACHED ITS DAILY PRICE FLUCTUATION LIMIT, A "LIMIT MOVE", IT MAY BE IMPOSSIBLE TO EXECUTE A STOP LOSS ORDER.
THE RISK OF LOSS IN TRADING COMMODITY FUTURES AND OPTIONS CONTRACTS CAN BE SUBSTANTIAL. THERE IS A HIGH DEGREE OF LEVERAGE IN FUTURES TRADING BECAUSE OF SMALL MARGIN REQUIREMENTS. THIS LEVERAGE CAN WORK AGAINST YOU AS WELL AS FOR YOU AND CAN LEAD TO LARGE LOSSES AS WELL AS LARGE GAINS.
THIS MATERIAL IS CONVEYED AS A SOLICITATION FOR ENTERING INTO A DERIVATIVES TRANSACTION.
THIS MATERIAL HAS BEEN PREPARED BY A DANIELS TRADING BROKER WHO PROVIDES RESEARCH MARKET COMMENTARY AND TRADE RECOMMENDATIONS AS PART OF HIS OR HER SOLICITATION FOR ACCOUNTS AND SOLICITATION FOR TRADES; HOWEVER, DANIELS TRADING DOES NOT MAINTAIN A RESEARCH DEPARTMENT AS DEFINED IN CFTC RULE 1.71. DANIELS TRADING, ITS PRINCIPALS, BROKERS AND EMPLOYEES MAY TRADE IN DERIVATIVES FOR THEIR OWN ACCOUNTS OR FOR THE ACCOUNTS OF OTHERS. DUE TO VARIOUS FACTORS (SUCH AS RISK TOLERANCE, MARGIN REQUIREMENTS, TRADING OBJECTIVES, SHORT TERM VS. LONG TERM STRATEGIES, TECHNICAL VS. FUNDAMENTAL MARKET ANALYSIS, AND OTHER FACTORS) SUCH TRADING MAY RESULT IN THE INITIATION OR LIQUIDATION OF POSITIONS THAT ARE DIFFERENT FROM OR CONTRARY TO THE OPINIONS AND RECOMMENDATIONS CONTAINED THEREIN.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. THE RISK OF LOSS IN TRADING FUTURES CONTRACTS OR COMMODITY OPTIONS CAN BE SUBSTANTIAL, AND THEREFORE INVESTORS SHOULD UNDERSTAND THE RISKS INVOLVED IN TAKING LEVERAGED POSITIONS AND MUST ASSUME RESPONSIBILITY FOR THE RISKS ASSOCIATED WITH SUCH INVESTMENTS AND FOR THEIR RESULTS.
TRADE RECOMMENDATIONS AND PROFIT/LOSS CALCULATIONS MAY NOT INCLUDE COMMISSIONS AND FEES. PLEASE CONSULT YOUR BROKER FOR DETAILS BASED ON YOUR TRADING ARRANGEMENT AND COMMISSION SETUP.
YOU SHOULD CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES AND FINANCIAL RESOURCES. YOU SHOULD READ THE "RISK DISCLOSURE" WEBPAGE ACCESSED AT WWW.DANIELSTRADING.COM AT THE BOTTOM OF THE HOMEPAGE. DANIELS TRADING IS NOT AFFILIATED WITH NOR DOES IT ENDORSE ANY TRADING SYSTEM, NEWSLETTER OR OTHER SIMILAR SERVICE. DANIELS TRADING DOES NOT GUARANTEE OR VERIFY ANY PERFORMANCE CLAIMS MADE BY SUCH SYSTEMS OR SERVICE.
GLOBAL ASSET ADVISORS, LLC (“GAA”) (DBA: DANIELS TRADING, TOP THIRD AG MARKETING AND FUTURES ONLINE) IS AN INTRODUCING BROKER TO GAIN CAPITAL GROUP, LLC (GCG) A FUTURES COMMISSION MERCHANT AND RETAIL FOREIGN EXCHANGE DEALER. GAA AND GCG ARE WHOLLY OWNED SUBSIDIARIES OF STONEX GROUP INC. (NASDAQ:SNEX) THE ULTIMATE PARENT COMPANY.