This has been a successful seasonal trade in many years, and the last two years were the second and third best years in our history. We have used this in 23 of the past 24 years – skipping only 1995, for reasons which I no longer recall.
In this trade, we buy RBOB Gasoline futures and sell Heating Oil futures. This is the simplest way to establish the spread, eschewing futures options and ETF options – the options are just too illiquid in the February contracts, which is what we use for this spread.
Figure 5 shows a composite of this spread over the past 26 years. The optimal entry is..
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