Trade Idea: Heating Oil

ENERGY

July Heating Oil over the past few weeks has been pulling back with weather across the country heating up. Technically we have some major support at $2.85 and price is starting to approach that level. Typically in the summer months front month Heating Oil will trade between $2.90 and $2.75. In our opinion we are right in the sweet spot for a great seasonal trade.

Trade Idea: Heating Oil Long January/February  This bull spread has a very correlated 5 and 15 year price average pattern. Historically this spread has not traded below $-.020 over the last 28 years. We like the spread around $.040 to initiate the position and $.000 to add the second half. We will risk to historic lows of $-.020. The statistics also support a strong seasonal pattern, over the last 15 years this seasonal spread has won 15 out of 15, 100% win rate. We have an open order GTC to buy this bull spread at $.040.

HEAT

Win%—–100%

Days in Trade——29

Worst Down——-($34.16)

Best up——–$248.08

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3 thoughts on “Trade Idea: Heating Oil

  1. Now this is one solid trade. Without yet looking at my own charts don’t know where for me to enter but from what you say it looks very a solid buy near parity. Market should be very liquid on these close months allowing a live GTC stop for at least pit hours. Mahalo! We may both be in this trade.

  2. Hmm. I guess you’ve been stopped out quite a ways back on both lots if you bought =/HOZ4-/HOF5 at +0.020 cents and then added at 0.000, because it bottomed at -.0348 on June 4, one day after you posted this. Or maybe your terminology from Moore is upside-down, but that makes no sense either. I cannot grok it.

    Expecting a retest of the June 4 low a week ago where it stopped just shy of MINUS 3.48 cents … This is a solid trade to buy =/HOZ4-/HOF5 at price of -$0.034, LMT, GTC. Which I just now entered.

  3. OK. Maybe you confused HO for RB. But I’m using the same broker that makes your pretty charts and price hit a low of MINUS 3.48 cents on June 4. After some noodling around there it looks like the above June 3 trade idea for “Heating Oil” makes sense at the mentioned prices if you change the instrument to RBOB, prefix RB, or Unleaded Gasoline, which goes up in the summer because that’s the travel season. HO is Heating Oil.

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