1, Niusan
In the oil futures market, the bull market spread is carried out by buying oil futures contracts in the latest delivery month and selling oil futures contracts in the forward delivery month. As long as the recent contract price increases more than the forward contract price, arbitrage will be successful.
For oil futures, the monthly position fee of general oil warehouse receipts determines the price difference between two adjacent delivery months. However, if it is a contract between two consecutive months in the same oil-producing year, when the price difference between the contract in a longer month and the contract in a closer month is greater than the position cost, it is expected that the price difference will return to the position cost in the future, so it is profitable to buy the contract in a closer month and sell the contract in a longer month at the same time. The bigger the price difference, the smaller the risk, that is, the greater the profit space. In the reverse market, the bigger the spread, the better for the arbitrageurs.
In addition, the positive market of oil futures has another feature, that is, there is no limit on the premium of forward contracts in recent contracts, while the premium of forward contracts in recent contracts is limited by the position fee. Therefore, in the arbitrage trading of oil futures, Niu San has huge profit potential and only needs to bear limited risks, which is also the reason why the arbitrage trading of oil futures is popular.
2. Bear market arbitrage
Bear market arbitrage is the opposite, that is, selling the oil futures contract in the latest delivery month and buying the oil futures contract in the forward delivery month, and betting that the price drop of the forward contract is less than that of the recent contract will succeed.
In the bear market arbitrage of oil futures, whether the spread is enlarged determines whether the arbitrage is successful. When the price difference between the forward month contract and the recent month contract is less than the position cost, it is expected that the future price difference will return to the position cost, so when you buy the forward month contract, you can make a profit by selling the recent month contract. The smaller the price difference, the smaller the risk and the greater the profit margin. The narrowing of the reverse market spread is beneficial to arbitrageurs.
In addition, because the spread in the forward market is limited by the position fee, the premium of the recent contract in the reverse market to the forward contract can be very large, so the gains in this bear market arbitrage may be limited, but once it suffers losses, it will be huge.