Key Takeaways with Craig
US Equity prices struggled to find a solid direction again today but were trading mostly higher in mid-afternoon action. Implied volatility in CME’s Equity Index options markets has declined to about the six month average level. US Treasury yields declined today, according to CME’s Micro Treasury Yield futures contracts.
It was an otherwise relatively quiet day in CME Group markets compared to what we’ve seen a lot in 2022. We thought it would be a good time to re-introduce another spread trade that traders can take advantage of using CME markets; the Crack Spread. This spread allows market participants to take a position on the price of WTI Crude Oil relative to one of its constituent products, RBOB Gasoline, two products that have been front and center in both the financial and mainstream news.
Many different factors including supply/demand, disruptions to refining capacity, storage costs and others can impact the price relationship between Crude Oil and RBOB Gasoline. Using QuikStrike, we graphed the price level of this spread over the last year in the image below. Because there are 42 gallons in a barrel of Crude Oil, we multiplied the price of RBOB Gasoline by 42 to get the spread level. As you can see, not only has the price of WTI Crude Oil risen dramatically, but the price of RBOB Gasoline, relative to Crude Oil has also risen (as noted by the decline in the blue line since we graphed the price of WTI Crude minus that of RBOB). Both of these products are available for trading on CME’s match engine, Globex.
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