Introduction to the
Oil-Gasoline Crack Spread

The OGCS Getting Started Guide

A step-by-step guide that provides everything that you need to get set up and ready to trade the Oil-Gasoline Crack Spread in your own accounts.

The OGCS Getting Started Guide makes the setup process, and the learning gap to placing crack spread trades, easy.

Here is what is included in the guide:

1) Choosing a Brokerage Account (if you don’t have one)
2) Setting up your complex watchlists and charts
3) Learning how to trade the Crack Spread in the simulator(s)

You will learn everything that you need to know to make actual live trades - from which brokerage to choose, applying for your account, setup of your spread tracking/monitoring method(s), finding the correct contracts, setting up a simulated trade, and placing a simulated trade.

The OGCS Complete Professional Trading Guide

This professional-level guide provides comprehensive coverage on trading the CL/RBOB crack spread—a critical energy-market strategy involving simultaneous positions in crude oil (WTI) and gasoline futures (RBOB). It's divided into five detailed parts:

Part 1: Spread Dynamics & Risk Profiles

• Spread Basics: Differences between same-month and offset-month spreads; real-world refinery economics.

• Positioning: Explains risks and rewards of long vs. short crack spreads, emphasizing long positions as safer and more aligned with fundamental refining margins.

• Risk Mitigation: Introduces hedging strategies using futures options (collars and spreads), regression channel technical analysis, and prudent leverage through margin credits.

• Historical Case Studies: Analyzes how crack spreads behaved during major events like the 2008 financial crisis, COVID-19 lockdowns, and the Russia-Ukraine war.

Part 2: Global & Regional Market Analysis

• Refineries and Regional Dynamics: Major global refining hubs (e.g., U.S. Gulf Coast, ARA, Singapore) and their impact on gasoline markets.

• Transportation Infrastructure: Importance of pipelines (e.g., Colonial Pipeline), shipping routes, trucking, and rail on local and global crack spreads.

• Industry Segmentation: Differences among upstream, midstream, and downstream sectors, and their interconnected effects on crack spreads.

• Crude Oil Varieties: Refinery compatibility with crude types (heavy vs. light, sweet vs. sour), and implications on refining margins.

• Seasonality: Regular refinery maintenance cycles, seasonal gasoline blend changes, and their typical impact on gasoline pricing.

Part 3: Advanced Trading Dynamics – Risk, Reward & Capital Efficiency

• Detailed Risk/Reward Analysis: Clarifies asymmetric nature of crack spread trades, favoring long crack positions due to bounded downside risk and unlimited upside potential.

• Margin Efficiency: Highlights how exchanges offer substantial margin credits for crack spreads, dramatically improving capital efficiency but emphasizing disciplined risk management.

• Additional Market Influences: Covers forex movements, freight logistics, inventory data timing, political/regulatory risks, and weather events.

• Strategic Enhancements: Advises on hedging short crack positions with options, ratio spreads, collars, and portfolio-level stress testing for robustness.

Part 4: Real-World Execution & Portfolio Integration

• Execution Strategies: Practical guidance on using Interactive Brokers TWS and professional platforms like Bloomberg Terminal or CME Direct to manage crack spread trades efficiently.

• Contract Management: Explains nuances of rolling contracts forward to avoid leg-risk and maintain hedged positions.

• P&L Templates & Examples: Provides specific profit-and-loss scenarios, demonstrating how to track spread movements and outcomes.

• Portfolio Integration & Risk Management: Details how crack spreads fit into broader portfolio strategies, including correlation analysis, Value-at-Risk (VaR), and scenario stress-testing.

• Recommended Tools & Resources: Lists essential market intelligence platforms (Bloomberg, CME tools, EIA reports) and risk management software to optimize crack spread trading.

Part 5: Future Outlook and Strategic Adaptation

• Real-world Interviews: Insights from experienced crack spread traders and refiners about real-market experiences.

• Advanced Analytics & Modeling: Techniques like Monte Carlo simulations for refining margin forecasting.

• Regulatory and Environmental Impacts: Deeper exploration into how new regulations (biofuels, carbon pricing) will shape future crack spread dynamics.

• Global Energy Transition: Assessing impacts of electrification and renewables adoption on long-term gasoline and diesel demand.