Trade tickets
From a signal to a trade
A signal is not yet a trade. Below, the rule from the crack spread and butterfly pages is turned into a ticket for each spread: what to buy and sell, how much, where to take profit and where to give up. The record of the same rule is next to it, so you can see how far to trust it.
Research, not advice. Nothing here has been traded. The prices come from free public sources and are not live. Use a ticket to see how a trade is built, not to place one.
Oil refining margin
Crack spread 3-2-1
The trade: --
The crack has been moving -- a barrel on a typical day. Size: --. One package earns or loses -- for every $1 the spread moves.
| Action | Contract | Lots | Barrels | Spot price |
|---|
At this size, a trade like the worst one in the record would cost --. Prices are spot prices from the EIA. Futures prices differ from spot, so look at the real contracts on your screen.
Where to enter, take profit and give up
- Crack now
- --
- 250-day average
- --
- z-score
- --
- Entry
- --
- Take profit near
- --
- Give up at
- --
The stop is fixed on the day the trade opens, 2 standard deviations against it. A trade like this lasted --.
The record of this rule
| Period | Sharpe |
|---|
Is today a good moment?
Before you trade it
- Is there a lasting reason for the margin to be this high or this low, such as a war, a sanction or a plant closing? If yes, the gap may stay open.
- Size for the worst trade, not the average one. The average trade is small and the worst is more than ten times bigger.
- Check the real futures prices, the roll dates and the margin your broker asks for.
US Treasury curve
Butterfly 2s5s10s
The trade: --
The belly is the 5-year. The wings are the 2-year and the 10-year. Each wing carries half of that DV01, so a move of the whole curve up or down does nothing. A basis point is 0.01 percentage point.
| Action | Leg | Notional | DV01 | Futures |
|---|
Where to enter, take profit and give up
- Butterfly now
- --
- 250-day average
- --
- z-score
- --
- Entry
- --
- Take profit near
- --
- Give up at
- --
The stop is fixed on the day the trade opens, 2 standard deviations against it. A trade like this lasted --.
The record of this rule
| Period | Sharpe |
|---|
Is today a good moment?
Before you trade it
- Is the central bank about to change course? If the whole curve is being repriced, a stretched 5-year can keep stretching.
- The futures sizes here are estimates. They use a par bond of each maturity, not the cheapest bond to deliver. Check the DV01 on your screen.
- Costs: the record assumes half a basis point of the butterfly each time you trade. In quiet markets that eats the small gaps.
How to read a ticket
Signal. The rule counts how many standard deviations the spread is from its 250-day average (the z-score). It sells the spread above 1.5 and buys it below -1.5. It leaves when the z-score is back inside 0.5.
Open trade. The rule keeps a trade until it exits, so a spread that looks normal today can still be inside a trade that opened weeks ago. The ticket tells you which case you are in.
Stopped out. If the trade goes 2 standard deviations against the entry, the rule gives up and waits until the z-score comes back inside 1.5. It does not buy the same fall again the next day.
The figures are computed in your browser from files refreshed every morning: Treasury yields from FRED and oil prices from the EIA. The calculation is the same as in the research repository, rewritten in JavaScript and checked against the Python.