fbpx 2017 Heating Oil – Gasoline Spread (Preview) | Option Strategist

2017 Heating Oil – Gasoline Spread (Preview)

By Lawrence G. McMillan

This has been a successful seasonal trade in many years, and last year was the second best year in our history. We have used this in 22 of the past 23 years – skipping only 1995, for reasons which I no longer recall.

In this trade, we buy RBOB Gasoline futures and sell Heating Oil futures. This is the simplest way to establish the spread, eschewing futures options and ETF options – the options are just too illiquid in the February contracts, which is what we use for this spread.

Figure 5 shows a composite of this spread over the past 25 years. The optimal entry is 56 trading days after the end of August – which this year is Friday, November 18th. The optimal exit date is in early January, but in reality we trade this with a trailing stop, and usually exit a bit earlier than that.

Table 4 shows the yearly results that we have actually experienced in our trades, having traded 22 times in the past. The Year shown in the table is the year of the futures contracts, not the year when the trade was established, so for example, the 2016 line in the table was last year’s trade, using contracts that expired in February 2016...

Table 1

Read the full feature article (published 11/11/16) by subscribing to The Option Strategist Newsletter.

The Option Strategist Newsletter $29 trial

Share this

Option Strategist
Blog Search

Trading or investing whether on margin or otherwise carries a high level of risk, and may not be suitable for all persons. Leverage can work against you as well as for you. Before deciding to trade or invest you should carefully consider your investment objectives, level of experience, and ability to tolerate risk. The possibility exists that you could sustain a loss of some or all of your initial investment or even more than your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and investing, and seek advice from an independent financial advisor if you have any doubts. Past performance is not necessarily indicative of future results.
Visit the Disclosure & Policies page for full website disclosures.

-->