Gasoline/Crude Oil Spread: Roll To August

Extending Our Lease

The IMC blog is holding a hypothetical short position in the July RBOB gasoline/crude oil spread that was entered at the equivalent of $19.61 (premium gasoline) on January 15th.

July RBOB Gasoline Crude Oil spread daily

July RBOB Gasoline Crude Oil spread daily

The big break in the energy markets pushed the July spread down faster than the longer delivery spreads.  Since the July spread has to be rolled or liquidated next week anyhow, we’re going to take advantage of today’s break and roll at the close.

August RBOB Gasoline Crude Oil spread daily

August RBOB Gasoline Crude Oil spread daily

The August spread is currently trading almost $1.50 higher than the July spread.  In addition, the current 2016 high for the August spread is $1.40 lower than the 2016 high for the July spread.  Therefore, rolling to the August spread now and risking to new highs greatly reduces the risk on the trade.  Whenever you can reduce your risk and keep the profit potential the same, you’ve got a no-brainer situation.  Those are usually only obvious in hindsight, so let’s accept this gift that the energy markets have bestowed up on today.

Trade Strategy:

For tracking purposes, the blog will liquidate the short position in the July RBOB gasoline/crude oil spread and simultaneously enter a short position in the August RBOB gasoline/crude oil spread at the market-on-close on Friday, June 24th.  Risk a two-consecutive day close above $21.30.

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