Top Traders Unplugged

OI1: Cracking the Code of Commodity Spread Trading ft. Mauritz van den Worm

11 snips
Nov 1, 2023
Guest
Mauritz van den Worm
In this podcast, Mauritz van den Worm, a quant researcher at Polarstar, a commodities-focused hedge fund in Cape Town, South Africa, talks about the fascinating world of commodity spreads. Topics include calendar spreads, cross-market substitution spreads, location arbitrage trades, and processing margin spreads. Mauritz also shares a firsthand account of Polarstar's position in US versus European grain spreads during Russia's invasion of Ukraine. The podcast explores the complexities and strategies behind commodity trading.
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ADVICE

Patience in Position Building

  • Entering large spread trades often requires patiently building positions over weeks or months.
  • Slowly chip away at orders to avoid disrupting the market and maintain anonymity.
INSIGHT

Hybrid Quant-Fundamental Approach

  • Polastar uses a hybrid approach combining quantitative screens with fundamental commodity analysis.
  • They only trade spreads with a fundamental relation and seek an upside/downside ratio of at least 2:1.
ADVICE

Blend Quant and Expert Fundamentals

  • Combine quantitative modeling with expert fundamental analysis for better spread trade decisions.
  • Use legacy physical market experience to validate quantitative triggers and improve forecasting.
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