"Crack" Spread Revisited

By Craig Bewick
MAR 15 2021

Relatively quiet financial and commodity markets greeted the trading week with US Equites ending mostly higher after somewhat directionless trading throughout the day.  Implied volatility in CME Group equity index options markets declined from the levels we saw Friday.

US Dollar futures prices were near steady from Friday’s levels against most major currencies and precious metals futures prices were just slightly higher.  US Treasury futures prices at the longer end of the curve rallied a bit, indicating slightly lower yields.  The market will be watching the results of the FOMC meeting this Wednesday, not so much to see if they change the Fed Funds target rate (which is widely expected to remain at 0-25 basis points), but for the accompanying comments from the Fed.  The CME Group FedWatch tool, which uses Fed Funds futures prices to assign a probability of a target rate move at each meeting, assigns a zero percent chance that the Fed changes the target rate from the current 0-25 bps on Wednesday, but does show a very slight chance (4.1%) of a 25 basis point hike at the April meeting. 

Finally, WTI Crude Oil futures prices were down by about .4% while RBOB Gasoline futures prices declined by about 2%.  This prompted us to revisit the “Crack” or Crude vs Gas spread that we featured here in the Key Takeaways section a few weeks ago.  As you can see in the QuikStrike graph below that illustrates the price relationship between WTI Crude Oil and one of the refined products that is made from it, RBOB Gasoline (both of which are traded on CME Group’s Globex central match engine), until today’s price action, Gas futures prices were trading at a level as high relative to WTI Crude Oil as they had in a year.  As we discussed before, this can be an interesting spread for traders because of the multitude of factors that can influence the prices such as refiner capacity, production economics, supply/demand, among many more.  Also, because CME Group lists this as a “predefined” spread on Globex, customers can execute both legs of this spread in one transaction. 


Craig Bewick has spent 25 years in futures and options markets, starting at CBOT and CME working in risk management, regulatory, technology, product management and client development. 

Connect with Craig at activetrader@cmegroup.com

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