FIN 376: Trading Futures Spreads -- 12/1/2015

1. Trade a 3:2:1 crack spread.
2. Trade a 1:1:1 crush spread.
3. Trade an NG calendar spread (where you are trading the storage spread and convenience yield.)

Record the prices at which you traded and calculate the refining margin for the crack and crush spread. After a week or so we'll close the trade and calculate the closing refining margin (and our profit/loss). However, upload the prices at which you traded and the refining margins to the D2L dropbox today, and we'll upload the prices at which you closed the contracts later.

Also be sure to trade liquid contracts (look at volume and open interest). You'll probably want to use front-month contracts.

You can buy or sell the 3:2:1 crack spread, meaning either:

- buy 3 crude oil, and sell 2 gasoline and 1 heating oil
- sell 3 crude oil, and buy 2 gasoline and 1 heating oil

Similarly for the 1:1:1 crush spread you can either:

- buy 1 soybean contract, and sell 1 soy meal and soy oil contract
- sell 1 soybean contract, and buy 1 soy meal and soy oil contract

Be sure to read this post about the crush spread: http://www.complete-markets.com/2012/11/fin-376-trading-crush-spread.html

For the calendar spread, you buy NG for delivery one month and sell NG for delivery in another month.

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