As Bank of America Merrill Lynch commodity analysts predict “the conditions for a floor in crude oil prices are coming together,” expecting a recovery into the summer months with a $47 WTI crude forecast, auguring a bull case, a derivatives report notes opportunity. Such a rosy outlook also coalesces with another of their investment thesis prognostications from the derivatives team: The “Fed put” strike has shifted. This all occurs as price correlations between oil and equity markets are at an all-time high. In fact, the last time this occurred was prior to the 2008 financial crisis. The “Fed put” has…
With Oil/Equity Correlation At Extreme, Hedge Risk With Spread Trade
Mark Melin
Mark Melin is an alternative investment practitioner whose specialty is recognizing the impact of beta market environment on a technical trading strategy. A portfolio and industry consultant, wrote or edited three books including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008) and taught a course at Northwestern University's executive education program.