I have had some interesting days recently in 8/08 - 12/08 Crude futures and options. I am usually a straight out macro and short term systems guy

but the action of Oil on Thurs-Fri was something of a pinnacle.

Prior to Thurs, the 5 day ATR for oil was around $3.50, as of Friday it shot to $6 based on the massive short squeeze/margin changes/war talk etc

Anyway, I shorted front end oil Friday at $138.75 but at the same time Aug-Dec was in contango (this is crazy in a raging bull market)...

Anyway, check out seasonal spreads buying Sep 08 short Dec 08 for the next few weeks, I got a sweet short vega, long gamma (downside) on the outright and reverse on the spread. In essence I am risking $100k at best to $325k at worst to make $1.7 on a normal backwardation post Jul 08

Wow sick trade. How much has the Sep-Dec spread moved since you put it on?

How long would it take to explain this to someone who knows nothing about markets?

If not long then, I would love to know what the hell you are talking about. About the only part I understand is that you shorted oil.

How much of a difference must there be in price for you to consider the market in contango or backwardated? Everything looks pretty flat to me.

Its flattening now because index funds are rolling.

That doesn't affect the market remember?

At what price did you put the spread on, how wide do you expect the spread to go?

no, never

sorry been ill for a few weeks

in essence i have options bets on which make me a heap of money with Oct 08 oil at << $120 a barrel, Sep/Dec spread at anything in backwardation after 15 Aug 08 (that means Sep 08 price is higher than Dec 08) at this time Dec 08 is around $0.30 over Sep, every 10 cents the spread falls my way I make around $10k but am hedged to lose only $250k on spread.

Have put spreads on such that Oil << $120 or >> $145 I make around 3/1 on my bet

Oil above $165 between now and Dec I lose $300k

Dec 08 oil below $100 I make a heap

super newb but the normal way of oil prices is such that it should be more expensive in near months and a bit cheaper in furthur off months due to the fact that oil has industrial uses and holders benefit from immediate possession?

Yes, no, and sometimes are all answers to your question lol

There are oodles of different scenarios that cause markets to be in either contango or backwardation.