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.
Complete the following trades in your IB account and answer the questions below. Upload your answers to the D2L dropbox.
1. Sell 3000 barrels of oil for February 2016 delivery. How many contracts is this (and for what ticker)?
2. Buy 2 Eurodollar futures contracts. Will your contracts gain in value when LIBOR rates increase or decrease?
3. Trade (buy or sell) May 2016 Soybeans. How many bushels have you traded, and when is the last trade data and delivery point?
4. Trade April 2016 copper. When you enter into the contract what is the open interest, and what does open interest mean?
5. Sell 2 January 10-year Treasury note futures contracts. For each contract, what is the contract size, what must be delivered, and what is the minimum tick size?
6. Buy 4 December E-mini S&P 500 futures contracts. What is the multiplier on each contract, and how much of the S&P 5000 have you bought (in $)?
You can paste this into the RStudio console:
install.packages(c("quantmod", "IBrokers", "EIAdata", "rmarkdown", "caTools", "htmltools", "shiny", "knitr", "yaml", "tools", "utils", "grDevices", "testthat", "digest"), repo = "http://cran.rstudio.com")