Sign in or Register

Already a member?

Sign in

Or sign in with your account on:

Not a member yet?



Are Rising Gas Prices a Trading Opportunity?

By  +Follow July 1, 2014 12:47PM

summer gas prices 2014, are gas prices going up, trading gas prices, trading gas futures, hot to invest in higher gas prices

Summer driving season is upon us and with it the near certainty of the season’s highest gas prices. While most of the country is made to bow to the gas gods and offer up their first born as collateral for the vacation’s expenses, retail futures traders have the rare ability to profit from the situation that leaves their neighbor’s bearing tales of woe. The recent spike in RBOB gasoline occurs just as the reformulated summer blend squeezes through the pipes and leaves the market ready for the next phase of development.

The seasonal peak in unleaded prices has come between mid-March and Memorial Day more frequently than in the past. The last real summer rally in unleaded was 2008 when all commodities rose. While I agree that there are several good Ukrainian reasons to be nervous about shorting unleaded futures, I believe short selling is the play favored by the near-term odds. My primary analytical focus is the interaction of the commercial traders’ net position within the context of current price levels. Commercial traders have sold more than 33,000 forward contracts in the last two weeks. This type of producer hedging typically comes near market tops as you can see on this chart. Furthermore, you can see that commercial long hedge purchases present a strong correlation to the development of market bottoms.

Understanding the seasonality at play here, selling September unleaded futures is probably the way to go. Therefore, we will look to sell September Unleaded futures while placing a protective stop the $1.066 high. Based on the recent shift in commercial momentum and their historical selling patterns, there’s no reason to believe that refiners won’t continue to sell into this rally. Recent years have seen their net short position double their current level. This type of pressure should help keep retail traders in the game as the recent spike in gas prices becomes viewed as an opportunity rather than another rising family expense.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Liked What You Read? Join Equities.com as a contributor and get eyeballs on your content FOR FREE!

By  +Follow July 1, 2014 12:47PM



blog comments powered by Disqus

About us

Equities.com is the most advanced interactive online social ecosystem for the financial industry, serving as a resource center and next-generation communication platform that connects self-directed investors with public issuers, market experts, and professional service providers and vendors. Registered members can leverage our exclusive proprietary research tools such as the Small-Cap Stars, which outperformed 90% of all small-cap mutual funds, and robust do-it-yourself E.V.A. research reports. The Equities.com Issuer Dashboard is the ideal tool to communicate and manage investor awareness campaigns to the investment community, as well as to access valuable resources to help your company grow.

Market Data powered by QuoteMedia.
Copyright © QuoteMedia. Data delayed 15 minutes unless otherwise indicated. Terms of Use.

Login or Register