Managing Editor

Spreading Oil and Natural Gas: A Post-Labor Day Plan

Nab2807 -

You're right about trading the spread at parity. As pointed out in the article, the trade's efficiency is reduced, but what's a retail trader to do?

To obtain energy equivalency, you'd have to buy six gas contracts for every crude oil future sold short. That's a little rich for most traders' blood.

NYMEX, too, only grants margin credits for 1-to-1 spreads, so the cost of trading the "tail" of an energy-equivalent spread are very high.