Some Energy Hints from Bone

Discussion in 'Commodity Futures' started by bone, Feb 20, 2009.

  1. bone

    bone ET Sponsor

    I have seen alot of misnomers, misinformation, grasping at straws, and silly directional calls in the energy threads posted here. A little about my background - I was the top physical power trader at the USA's largest nuclear utility; an OTC swaps and options trader in cracks, sparks, gas, barges, and power for a major prop firm; and a Nymex and ICE futures trader for my own account. I even pairs trade energy equities.

    I don't want to come off as cryptic or clairvoyent - I have no idea if the flat price directional market is going up or down. And, I don't care. Doesn't matter to me.

    Yes - oil is in a severe a contango market. Last Friday, the March/April WTI spread rallied $3.20.

    Yes - natural gas is in the crapper, and the Spring widow-maker has been a non-event. So, would you sell the PJM-West Summer heat-rate?

    Energy is about spread relationships and the path of pain.
  2. That's really deep.
  3. Surprise


    Bone , which tiers is the best to scalp the RBOB calender spreads safely ? any tips about trading the RBOB calendar spreads ?
  4. bone

    bone ET Sponsor


    I would recommend trading RBOB Cals against Crude or HO Cals - kinda like a Box Crack Spread. There should be alot of juice in that trade, especially if refining capacity continues to be tight.
  5. 100% right!

  6. though i would never try to guess the direction of crude, gas and power are a different story. there is a wealth of data in these markets that lends itself to rigorous economic analysis. there are opportunities here if you are willing to take some pain and go through a rather arduous learning process

    Yes, I would sell the HR. Chart above is using Nymex settlements, not Ice, and I only have Ice set data archived, not Nymex so I can't vouch for how realistic their set values are.

    Looking to a monthly PJM spring spread here myself in the next few days..

    Gas used in that is HH of course, not Tetco.

    Are you doing Ice OTC in your own account? Minis might be an option for you if you don't feel like doing huge size.
  8. For those of you in HR's:

    How are you pricing the heatrate?

    How about once you have in on? Are you marking just on other HR transactions in the market, or are you marking the implicit gas & power legs daily?

    just curious.
  9. bone

    bone ET Sponsor

    I haven't traded heat rates for several months - the correlation between PJM-W firm on-peak and HH/Tetco Nat Gas is at an all-time low. I have been trading yield curve, cracks, and the oil and gas curves - doing OK with it. Liquidity in the OTC power market has been terrible. Most of the counterparties like Saracen, SIG, Constellation, LB, DB, GS, MS have been absent or laying really low.
  10. ERCOT is really slow too.

    VOlatility practically gone.
    #10     Feb 26, 2009