OIL Spread Trading

Discussion in 'Commodity Futures' started by fourth, Aug 28, 2008.

  1. fourth


    Hi guys I'm trying to gather information on money management strategies involved in trading the difference between Brent and WTI.

    I have not managed to turn up information besides a vague idea that equity pairs trading would be roughly the same.

    I put together some systems on my own along the premise of layers (i.e. each 50 point move away from the standard deviation I enter X contacts.

    I put together some drawdown projections based on the largest deviations that have occurred in the past to ensure I don't tank my account (unless we set a new high much larger than before.)

    Does anyone have any information to share about what I have written above? Perhaps different strategies? I have considered not using a static settping of 50c and instead using something based on statistics to optimise profits, perhaps having larger position on often seen deviations or tighter layers x points away from the standard deviation.

    I didn't hear about spread trading BTW, I just noticed two correlating charts one day when I was doing some investigations in to arbitration. So in short I have no source of information, I have been working this out as I go.
  2. Read the thread titled "Arb between Brent and Crude Oil" from August 5th in this forum. :)
  3. fourth


    Thanks but I have already read that thread. I've been trading this live for the past 3 months and have a ~20% return, but I feel that I'm my techniques are overly simple and there is to much guesswork and discretion involved.

    All I do is watch the overnight trading and watch for a small (10c) depression that occurs at the same time each day for a good entry, then wait out the reversion towards the zero point. It works but some times when I'm wrong it locks me up for a week or so.

    I also think that I should probably stagger my entries in to smaller portions over the deviation range.