Capturing RIN trading profits by theoretical price modeling
On December 14, 2021, Hoekstra Trading notified our clients of a RIN credit spread trading opportunity which is indicated by the gap between the dark green and light green data points on this chart:
The black line is the theoretical value calculated by the Hoekstra RINs price spreadsheet model. The opportunity was to sell the 2021 (light green) D4 RIN and buy the 2022 (dark green) D4 RIN for a credit of 25 to 40 cents per RIN. Since then, the spread has fallen to 9 cents per RIN.
Spotting and capturing RIN trading opportunities
Purchasers of Hoekstra Research Report 10 have this spreadsheet and understand the underlying economic and pricing theory. They know there are six circumstances that justify a difference in the pricing of D4 RINs of different vintage. On December 14 it was clear that none of these circumstances justified such a large price difference, hence, they could confidently take this credit spread position and capture a virtually riskless profit. The confidence comes from the proven capability of this model to apply economic and asset pricing fundamentals to the pricing of RINs.
The large price spread between 2022 and 2021-vintage D4 RINs is a tangible recent example of how the fundamentally-based Hoekstra IMS RIN pricing model enables our clients to quickly identify and capture RIN trading profits.
Hoekstra Research Report 10
includes our RINs pricing spreadsheet that applies the IMS model to calculate RIN prices for any set of inputs, plus a full history of RIN prices, a summary of key events in RINs history, a full explanation of RIN pricing and pass-through theory and related empirical studies, a set of attachments that will make you an expert on RIN pricing, plus a period of unlimited support by phone and E-mail. It is available immediately to anyone at negligible cost. See our offer letter and contact me, or (better), just send a purchase order today.
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