WTI vs. Brent arb seems to be reverting starting today

Today I started leaning heavily on the reversion trade.  Long Mar CL, short Mar COIL.  Also short Dec CL, short Dec COIL as a way to hedge against the chance that WTI SHOULD be cheaper than Brent long-term (which I doubt, but it reduces my risk greatly).  In addition, I'm no longer short long-dated WTIs against short VIX futures.

Also, the VIX index is now between the price of Feb and Mar VIX futures as I write this, so I'm long Feb VIX and short Mar VIX futures.

VLO and refining margins

As an additional hedge to the 3-way arb described in my earlier post Brent/WTI spread very wide, because the short long-dated WTI futures is overweighted in that arb, while RBOB (gasoline) futures are in backwardation, which would indicate further strength in gasoline, all other things being equal, you might want to buy VLO, the cheapest refiner fundamentally, with a great chart to boot, as an additional hedge to the previous trade.

Essentially, the trade as it stands now is a 4-way arb where every part of the trade has positive expectation of profit on its own, but hedges other parts of the trade nearly perfectly.  The legs of the trade are:

Long 1 unit Mar WTI
Short 1 unit Mar Brent
Short 1 unit Dec WTI
Long 1 unit Dec Brent
Short 1 unit either Dec or Jun WTI
Short 1 unit Feb VIX
Short 1 unit Mar VIX
Long some VLO, offsetting the short Dec/Jun WTI

This should essentially make you net flat risk aversion.  I'm currently in every leg of this trade.

Sitting pretty

Re: the trade I posted previously (Uptrending Equity: TSLA option arb),  the interest rates on the borrowed shorts are falling off a cliff every day now, so the negative carry is dropping sharply while the implied volatility disparities between calls and puts is also dropping sharply.  Making me a bunch of money every day now.  


The VXX short/ BGU short pair has also been bringing in money for me nearly every day.  Still holding since Oct futures contango is also high.


Given Japan's decision to intervene in currency markets, other central banks with depressed economies may decide to compete to debase their own currencies, which will continue to be good for gold, which just hit new highs recently.  Gold to the moon!