Dated Brent Stripping

erikjwarren · September 14th, 2015, 11:27 am

Hi,Does anybody have eperience with stripping Dated instruments like DFL's and CFD's? I am looking at a trade where I:1. Sell Aug DFL at -,74 /BBL 100xand buy implied DFL at -,762 by doing the below trades:2. Buy Cal Aug CFD at October BFOE -,56 /BBL 100x3. Buy October EFP at -,35 /BBL 100x4. Sell Sep/Oct Futures at -,33 /BBL 45xHowever I am not able to reconcile this for a risk free profit? Been thinking about this for a little while so would love if somebody could shed some light on it:)

erikjwarren · September 16th, 2015, 6:50 am

just to clarify the idea is to take these trades to pricing so that at after last day of august there should be some positive P&L.

CommOddity · December 30th, 2015, 3:52 pm

Hi, first of all I have a doubt (sorry to answer with a question): can u trade EFPs? They involve taking a physical position on crude, while i guess your arbitrage is meant to be paper only...

erikjwarren · December 30th, 2015, 6:35 pm

Hi, thanks for taking a look at this:) I cannot trade efp so thats an obstacle for sure, but lets say I could and had a large physical book?

CommOddity · December 31st, 2015, 9:15 am

Something it's still missing in your arbitrage: your net position is Short october bfoe (but notice it's the average of Platts assessments) and Long october bfoe (which is a "paper" cargo).So at some time in August you will have to sell your october Bfoe in order not to get nominated for delivery: this open to a basis risk between the august average and the date when you sell the october bfoe.