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Is anyone taking advantage of the overnight charge by shorting US oil just before 10pm and closing on re-open at 11pm?

By my calculations the current spread would offer a £23 per point overnight charge (minus interest on any leverage taken). 

Shorting the DFB and then going long on a futures contract should mitigate any price movement in the minute or 2 between open and close (understand there could be some slippage).

Am I missing something glaringly obvious as I usually do? I understand this isn't a typical opportunity because of the abnormal spread but it seems to be there nonetheless.

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16 minutes ago, Crush1884 said:

Is anyone taking advantage of the overnight charge by shorting US oil just before 10pm and closing on re-open at 11pm?

By my calculations the current spread would offer a £23 per point overnight charge (minus interest on any leverage taken). 

Shorting the DFB and then going long on a futures contract should mitigate any price movement in the minute or 2 between open and close (understand there could be some slippage).

Am I missing something glaringly obvious as I usually do? I understand this isn't a typical opportunity because of the abnormal spread but it seems to be there nonetheless.

why not try it out on the demo platform and then you could tell us. don't usually get slippage on demo but you should see credit or withdrawal in the transaction history. some factors that may influence are that there can be small spikes in some markets around 10pm due to traders suddenly on mass getting in or out, also quite wild price swings not necessarily duplicated in the futures (or visa versa the spot market) and of course a short doesn't automatically mean an account credit, in some circumstances can actually mean a debit.

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Guest Homer Enronride
58 minutes ago, Crush1884 said:

Is anyone taking advantage of the overnight charge by shorting US oil just before 10pm and closing on re-open at 11pm?

By my calculations the current spread would offer a £23 per point overnight charge (minus interest on any leverage taken). 

Shorting the DFB and then going long on a futures contract should mitigate any price movement in the minute or 2 between open and close (understand there could be some slippage).

Am I missing something glaringly obvious as I usually do? I understand this isn't a typical opportunity because of the abnormal spread but it seems to be there nonetheless.

"There Ain't No Such Thing As A Free Lunch",

I doubt that IG will pay for the lunch?

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26 minutes ago, Caseynotes said:

why not try it out on the demo platform and then you could tell us. don't usually get slippage on demo but you should see credit or withdrawal in the transaction history. some factors that may influence are that there can be small spikes in some markets around 10pm due to traders suddenly on mass getting in or out, also quite wild price swings not necessarily duplicated in the futures (or visa versa the spot market) and of course a short doesn't automatically mean an account credit, in some circumstances can actually mean a debit.

It looks like the biggest challenge is getting an effective hedge by buying one of the futures contracts that doesn't  get the overnight charge. Looking back over the last week, whether you were buying Jun or Jul contract the price movement between close at 10pm and open at 11pm is quite divergent from the DFB price meaning any up movements might not be picked up by the futures contracts.

What's really strange is that the DFB price is supposed to be calculated from the Jun & July future. However from market close on Friday at 10pm to market open at 11pm Sunday both the Jun and July future lost around 30 points and the DFB gained 6 points. Not sure how that is possible because surely if the DFB is calculated as some sort of equidistance price between the 2 contracts (as a product of time) then if both contracts move negatively then the DFB must do as well.

I tried to get clarification on the DFB pricing model from IG but not had a response. Seems a bit shady and potentially a feature of them trying to lessen the arbitrage opportunity outlined above.

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8 minutes ago, Crush1884 said:

It looks like the biggest challenge is getting an effective hedge by buying one of the futures contracts that doesn't  get the overnight charge. Looking back over the last week, whether you were buying Jun or Jul contract the price movement between close at 10pm and open at 11pm is quite divergent from the DFB price meaning any up movements might not be picked up by the futures contracts.

What's really strange is that the DFB price is supposed to be calculated from the Jun & July future. However from market close on Friday at 10pm to market open at 11pm Sunday both the Jun and July future lost around 30 points and the DFB gained 6 points. Not sure how that is possible because surely if the DFB is calculated as some sort of equidistance price between the 2 contracts (as a product of time) then if both contracts move negatively then the DFB must do as well.

I tried to get clarification on the DFB pricing model from IG but not had a response. Seems a bit shady and potentially a feature of them trying to lessen the arbitrage opportunity outlined above.

I have seen written that IG don't automatically use the front and next futures contract but use the front and the next most liquid contract (though they offer only 2 they have access to more). 

image.thumb.png.ae2fdc3e9e0de6393da74eb706703bac.png

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10 hours ago, Guest Suresh said:

Hi ,

thanks and If I am long July oil do I need to pay interest adjustment every night . I hope not but want to check ?

thanks 

Hi, yes if your position is with the Spot chart (Daily Funded Bet) but not if your trade is on one of the Futures charts.

The interest charge applies if your trade is carried passed 10pm, if you close the trade before 10pm there is no charge.

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Oil being the worlds most important commodity has been the hardest hit due to the worldwide lockdown but also has the most potential for recovery post lockdown but all the longs out there will need to keep an eye on the futures market.

Just to outline the potential scenario as described in the podcast posted above;

Oil producers keep on producing, they know they need to cut back as storage will be 100% full within a few weeks but at a recent mtg could not agree and besides traders keep buying long futures contracts. Producers need to keep producing oil to fulfill the obligation of those future longs. Producers know there won't be any storage capacity but what do they care, not their problem. But the long buyers have no intention of taking delivery, before expiry they intend to sell - but to who? This is basically what happened at the expiry of the May contract, they had to pay to get out of their longs and the inevitable knock on into the ETP (exchange traded products) and CFD markets. But come the June contract expiry the situation will be worse, traders are still loading up on longs but what if there is still a worldwide shutdown?

The oil market looks likely to remain very volatile for some time yet and so the 'buy now, it can't go any lower can it?' strategy is not as safe as it sounds.

 

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US OIl Spot, June and July. The futures still with wide difference so expect continued large negative long swaps.

image.thumb.png.030b9751d74d43cfed565a99b4c1b370.png

 

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*Walter Bloomberg @DeItaOne

UNITED STATES OIL FUND USO.P SAYS IT HAD $725.5 MLN IN UNREALIZED LOSSES ON OIL CONTRACTS HEADING INTO APRIL - FILING

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Why have I lost 44 shares in United States Oil Fund LP (All sessions)?

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Posted (edited)

US Oil turned and heading back down.

H4 chart;

image.thumb.png.c85fa0e59bb79da96cdf45a059a32375.png

Edited by Caseynotes

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Spot, June and July reforming some sort of semblance of order, the large overnight charge for longs should be coming down.

H4 charts;

image.thumb.png.17bde057006da6f2efd37bf2cf56a86c.png

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On 28/04/2020 at 15:51, Crush1884 said:

Is anyone taking advantage of the overnight charge by shorting US oil just before 10pm and closing on re-open at 11pm?

By my calculations the current spread would offer a £23 per point overnight charge (minus interest on any leverage taken). 

Shorting the DFB and then going long on a futures contract should mitigate any price movement in the minute or 2 between open and close (understand there could be some slippage).

Am I missing something glaringly obvious as I usually do? I understand this isn't a typical opportunity because of the abnormal spread but it seems to be there nonetheless.

Yes, I did this and got a nice little email from IG:

image.thumb.png.1e0839694e7b1459ce8e72092ac9e154.png

 

I replied back asking what did I do wrong and if I could see any T&Cs that advised against this, but no reply yet...anybody know?

Anyhow, the gap between the front contracts have reduced significantly so the opportunity is much lower than it used to be...

Cheers

  • Thought provoking 1

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Doji on the daily, held at 20.5.

Daily chart;

image.thumb.png.6d6e909c57f704cb7b576285eec71c27.png

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On 01/05/2020 at 17:51, fihagil said:

Yes, I did this and got a nice little email from IG:

image.thumb.png.1e0839694e7b1459ce8e72092ac9e154.png

 

I replied back asking what did I do wrong and if I could see any T&Cs that advised against this, but no reply yet...anybody know?

Anyhow, the gap between the front contracts have reduced significantly so the opportunity is much lower than it used to be...

Cheers

I'm quite surprised you would get a letter like that from IG when you are in fact trading within the frame work they themselves provide.

I'm guessing if you have short term 'long positions' where its possible a day trader loses track of time and on occasions holds at market close IG would still expect overnight funding payment and would not deter you from further trading.

As a side note, the front and next futures have converged to make short position arbitrage type trades less appealing, but in the near term as the June contract nears expiry its possible that they diverge, maybe to levels similar to late April.  Interesting times!

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Oil going on a bit of a rip, halted at the weekly R2.

Daily chart;

image.thumb.png.b5def6ed3b3bef655a23bb374c6d3fdc.png

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Oil drop this time, back down to the daily pivot.

H1 chart;

image.thumb.png.dadec67554c09a1a3b0ac5db0dc7d99f.png

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US Oil back up to 27.13 (the weekly R2 ), currently at 26.72

H4 chart;

image.thumb.png.cb57f416cd531188f4a043b3b8b25cb9.png

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US Oil still trapped between 23.90 and 27.40, (weekly R1 and R2).

H4 chart;

image.thumb.png.5e358a28fe03c46507f6347516b7bd8f.png

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Spot oil continues to push upward now challenging the weekly chart resistance level 31.56 (red).

image.thumb.png.620f5b09f35da145f37b305c38a5bd06.png

  • Thought provoking 1

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