With the Mar WTI now rolled into Apr, which is much pricier, I'm contending against some strong negative roll yield on the Apr if I remain long the front month. When there's such a steep contango, the newly-rolled front month tends to slide down to prices near where the previous front month had traded. This had happened when Feb WTI rolled into Mar, when Mar promptly sold off. As such, I'm taking off all 4 legs of my oil trade to take a break from this craziness. I will still make select daytrades based on technicals.
With oil skyrocketing, the distillates can't keep up, and refining margins are falling a bit. Not sure if refiners will continue ripping or not. Stagnating oil hasn't kept the oil majors from mini-ripping for the last few months.
Tuesday, February 15, 2011
I've been getting killed on the front-month arb, along w/ everyone else, and I suspect there may be a fund or two in the same trade as me that are going down in flames and may have already liquidated or may need to do so soon. However, the other legs of my trade as described in my earlier post http://uptrendingequity.blogspot.com/2011/01/vlo-and-refining-margins.html have been keeping me in the game. Arbs can be a pain in the butt, and anything can happen in commodities, so I'll daytrade oil in special circumstances and look for signs that reversion on the front-months is likely, like soon after any news of a fund blowing out on this trade, or other outstanding technical setups