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Attachments: Brent/WTI Hedging Strategy
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Brent/WTI Hedging Strategy

  • #61
  • Sep 12, 2019 5:47am Sep 12, 2019 5:47am
First trade down and it worked. Just opened another one.
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We must learn who is gold, and who is gold plated
EventsTrader Live All Time Return: 54.4%
  • #62
  • Sep 12, 2019 6:46am Sep 12, 2019 6:46am
Quoting Hoffi4201
{quote} Thanks for your detailed explanation! Still a few questions left for me: How can I access this chart? Do I need an account with thinkorswin for that? Or is it also available on other platforms/brokers? Is it possible to have a backtest on this? Would be great
Try this here...
For positive swap put in XBRUSD 1 and XTIUSD -1 (adjust for your broker)...

Attached File(s)
File Type: mq4 Basket Profit 2 Pairs sq.mq4   17 KB | 686 downloads
  • #63
  • Sep 12, 2019 7:19am Sep 12, 2019 7:19am
Am I doing this right?
Attached Image

Been holding this for 18 hours now.
Quoting vpn
Well here goes nothing - giving this a shot for Ss and Gs. It's an interesting concept.{image}
  • #64
  • Sep 12, 2019 8:01am Sep 12, 2019 8:01am
Quoting vpn
Am I doing this right? {image} Been holding this for 18 hours now. {quote}
Perhaps if I continue this on a large scale and close out in profit then it might work.

I closed my trades with a minuscule profit, and re-opened with a larger position...
  • #65
  • Sep 12, 2019 4:52pm Sep 12, 2019 4:52pm
Quoting Hoffi4201
{quote} Thanks for your detailed explanation! Still a few questions left for me: How can I access this chart? Do I need an account with thinkorswin for that? Or is it also available on other platforms/brokers? Is it possible to have a backtest on this? Would be great
My pleasure Hoffi4201!
Quoting Hoffi4201
How can I access this chart? Do I need an account with thinkorswin for that? Or is it also available on other platforms/brokers?
The Thinkorswim platform makes pairs trading easy so its a good option. I'm not sure who else has something built in for this, but you could do it with any platform that has a built in scripting language (Ninjatrader, Tradestation, Tradingview, etc.)
Quoting Hoffi4201
Is it possible to have a backtest on this? Would be great
Its definitely possible to backtest it. Backtesting is a weakness for Thinkorswim so its best to do it with a different platform. I'll look into backtesting with R tonight, but I'm still gaining proficiency with it so I'm not making any promises. lol
Self-sufficiency is the greatest of all wealth. - Epicurus
  • #66
  • Sep 12, 2019 4:54pm Sep 12, 2019 4:54pm
Quoting Go5
{quote} Try this here... For positive swap put in XBRUSD 1 and XTIUSD -1 (adjust for your broker)... {file}
Thanks for sharing that, I'll have to try it out.
Self-sufficiency is the greatest of all wealth. - Epicurus
  • #67
  • Sep 12, 2019 5:03pm Sep 12, 2019 5:03pm
Quoting vpn
Am I doing this right? {image} Been holding this for 18 hours now. {quote}
I think you are. I've been holding mine for almost the same.
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We must learn who is gold, and who is gold plated
EventsTrader Live All Time Return: 54.4%
  • #68
  • Sep 12, 2019 5:59pm Sep 12, 2019 5:59pm
Quoting Ef5
{quote} My pleasure Hoffi4201! {quote} The Thinkorswim platform makes pairs trading easy so its a good option. I'm not sure who else has something built in for this, but you could do it with any platform that has a built in scripting language (Ninjatrader, Tradestation, Tradingview, etc.) {quote} Its definitely possible to backtest it. Backtesting is a weakness for Thinkorswim so its best to do it with a different platform. I'll look into backtesting with R tonight, but I'm still gaining proficiency with it so I'm not making any promises. lol...
very interesting idea to trade the oil future
looking foreward to see you backtest
best
  • #69
  • Sep 12, 2019 9:41pm Sep 12, 2019 9:41pm
Waiting on my current (2nd) trade:
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We must learn who is gold, and who is gold plated
EventsTrader Live All Time Return: 54.4%
  • #70
  • Sep 13, 2019 12:54am Sep 13, 2019 12:54am
Wow, there are a lot of good ideas in this thread. I don't know why I never noticed it before.

One thing to keep in mind too - sanctions can cause the Brent/WTI spread to widen to record levels. If I were in a spread position I would just make sure I kept my eye on potential conflict in the middle east.
  • #71
  • Sep 13, 2019 4:21am Sep 13, 2019 4:21am
Quoting EventsTrader
{quote} I think you are. I've been holding mine for almost the same. {image}
Still negative since I re-opened with a larger position. I'm in no rush, however.
  • #72
  • Sep 13, 2019 9:12am Sep 13, 2019 9:12am
Quoting Ef5
{quote} My pleasure Hoffi4201! {quote} The Thinkorswim platform makes pairs trading easy so its a good option. I'm not sure who else has something built in for this, but you could do it with any platform that has a built in scripting language (Ninjatrader, Tradestation, Tradingview, etc.) {quote} Its definitely possible to backtest it. Backtesting is a weakness for Thinkorswim so its best to do it with a different platform. I'll look into backtesting with R tonight, but I'm still gaining proficiency with it so I'm not making any promises. lol...
if you need tick data for backtest - let me know
  • #73
  • Sep 13, 2019 11:19pm Sep 13, 2019 11:19pm
Quoting helgastrxd
Wow, there are a lot of good ideas in this thread. I don't know why I never noticed it before. One thing to keep in mind too - sanctions can cause the Brent/WTI spread to widen to record levels. If I were in a spread position I would just make sure I kept my eye on potential conflict in the middle east.
Yep, you're right. Trade friction has been a big fundamental driver of the spread and it is a major risk to a mean reversion strategy.

Quoting hundsbua
{quote} if you need tick data for backtest - let me know
Actually if you have 30m or 1h Brent and WTI data in csv that would be really useful. I can't directly export it from my platform so I'd either have to try use TD Ameritrade's API or resort to using daily data from another source. I think daily is too high of timeframe for this.
Self-sufficiency is the greatest of all wealth. - Epicurus
  • #74
  • Sep 14, 2019 7:48pm Sep 14, 2019 7:48pm
Quoting Ef5
{quote} Yep, you're right. Trade friction has been a big fundamental driver of the spread and it is a major risk to a mean reversion strategy. {quote} Actually if you have 30m or 1h Brent and WTI data in csv that would be really useful. I can't directly export it from my platform so I'd either have to try use TD Ameritrade's API or resort to using daily data from another source. I think daily is too high of timeframe for this.
see zip file
Attached File(s)
File Type: zip brent-wti-5year-60min.zip   1.2 MB | 614 downloads
  • #75
  • Sep 15, 2019 1:12am Sep 15, 2019 1:12am
Quoting hundsbua
{quote} see zip file {file}
Thank you hundsbua!!!
Self-sufficiency is the greatest of all wealth. - Epicurus
  • #76
  • Sep 15, 2019 5:43am Sep 15, 2019 5:43am
Thank you guys for digging my old thread

Have traded with this strategy for around 6 months in 2015 ,and left after that as the spread widens

will test it out now ,how it goes
  • #77
  • Sep 15, 2019 6:00am Sep 15, 2019 6:00am
Quoting EventsTrader
{quote} I think you are. I've been holding mine for almost the same. {image}
there is a big gap 500-1000 pips (5-10)$ up maybe go up more and more but in the the moment the Aramco announce they start produce as before the drone attack it will close the gap better to trade in small lot size
good luck for all
  • #78
  • Sep 16, 2019 12:22pm Sep 16, 2019 12:22pm
Hi guys
WTI and Brent are more or less the same product. They have both the same fuel value.
For this reason both should cost the same. The spread is not because one of them is better but of imbalance.
I hope you understand what I want so say.
So what is the fair value of one barrel oil?
We don't know. But we can assume that it is not the price we see.

I would trade the higher one short and the lower one long. BUT only with the exact same risk! NOT the same position size as mentioned above. This is important because if the risk is different it is no hedging anymore!
Over time one of them moves faster than the other to catch up the difference to the fair value.
  • #79
  • Sep 16, 2019 1:05pm Sep 16, 2019 1:05pm
Can anyone kindly explain what dictates/affects the overnight rates in Brent and WTI? I've searched google but to no avail.

Is it just the current forward rate based on the current futures price of both?
Hypocrite lecteur, mon semblable, mon frere!
  • #80
  • Sep 16, 2019 3:01pm Sep 16, 2019 3:01pm
Quoting techlover
Thank you guys for digging my old thread Have traded with this strategy for around 6 months in 2015 ,and left after that as the spread widens will test it out now ,how it goes
He's alive! This is a nice tool in the toolbox for these conditions! I'm glad you're back

Quoting Adabi
Hi guys WTI and Brent are more or less the same product. They have both the same fuel value. For this reason both should cost the same. The spread is not because one of them is better but of imbalance. I hope you understand what I want so say. So what is the fair value of one barrel oil? We don't know. But we can assume that it is not the price we see. I would trade the higher one short and the lower one long. BUT only with the exact same risk! NOT the same position size as mentioned above. This is important because if the risk is different it is...
Don't hold me to this, but the difference in price is because of the source streams and quality of the petroleum. WTI and Brent are basically the same, but I think WTI is a tad bit cleaner?

Quoting tinnitus
Can anyone kindly explain what dictates/affects the overnight rates in Brent and WTI? I've searched google but to no avail. Is it just the current forward rate based on the current futures price of both?
Good question! Inquiring minds would like to know.
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