FYI summer is historically not a big demand season for heating oil. Why aren't you trading a bull spread on RBOB? Edit, just read the above. Good call.
I realize this but based on some of my own research I think you are going to have some demand in Heating Oil as well. Anyways Jun-Aug13 trading at 84 today and thinking about adding another lot to this thing. Still feeling it out. Having been looking at the Jul-Sep13 RBOB and will be looking for 575 on that to get long.
watching the curve over time will give you an idea of what the front curve acts like in an extreme backward situation... the idea behind some of these spread trades is to make the carry.... if i was trading with your directional bias... i would have a couple bear spreads in back months to hedge the 1 single front month bull spread... otherwise your going to take tons of heat when your wrong.. granted there is less risk being short a front calender then long a front calender.. but you can still bleed to death..
Keep an eye on the NY Heat vs. ICE Gasoil spread. The arb is technically open by a small margin, so you may see product moving west.
I'm used to outrights so a 1 lot calendar, now 2 lot calendar, is child's play imo. Obviously anything can happen but my risk is fairly minimal right now. I don't think I want to hedge because I feel like there is alot of edge in the posistion I have on now. I'm looking for more of a directional move than just capturing the carry. I'm not sure how liquid alot of those back month spreads are anyways. Thanks for contributing guys. Energy spreads are not exactly something I get to talk about in my social circles.
Also caveman pretty sure I was wrong on NG now and it looks bullish to neutral now. What strikes and month is your butterfly? How are you managing it?