Articles written by Cynthia Kase fall into two general categories: Hedging and Trading. The individual articles may be found listed under each category heading below. For a description of the article and its subject click the title of the article.

For a full bibliography of articles, books and contributed chapters written by Kase click here.

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Stocks and Commodities Interview

Cynthia A. Kase, CMT, MFTA is interviewed by Stocks and Commodities about her market experience, indicators and forecasting techniques. Click here to preview the article.

Primarily Hedging Related

Preparing to Manage Energy Costs American Ceramics Society Bulletin, October 2006 - This article explains the basics of starting a hedge program based on logical hedge methodologies for small and mid-sized end users. Different types of hedge strategies are discussed as well as important topics and decisions that are usually overlooked by inexperienced risk managers. Kase Reveals Technical Hedging Tips for Not-So-Technical Traders EL & P, Dec. 2001 - This article addresses technical hedging topics in a question and answer format. The topics covered include the challenges of trading and hedging electricity, the importance of exits and some of the most common hedging mistakes with tips on how to avoid them. Also addressed are some of the general rules that govern the market and hedging, the differences between statistical and technical hedging and the basic ideas behind strategic (statistical) hedging. Market Secrets That Energy Hedgers Should Know Derivatives Strategy Magazine, December 1999 - Producers and Consumers can learn to become better hedgers by focusing on a few commonalties in the market. Seasonally of prices, defining when and how much to hedge, understanding what happens when a futures month expires, how far out to hedge and finally, buying price protection will greatly increase the odds of placing a great hedge and profiting form it. Risk Management Checklist Financial Engineering News, July 1998 - This article provides a logical, step by step checklist designed specifically to assist hedgers (producers and end-users of natural gas, crude oil and natural gas liquids) in pinpointing strategic elements important to them. The checklist helps determine these strategic elements such as exposures and risk appetite, it also helps us develop mechanical approaches to hedging utilizing basic statistics and assists in selecting reasonable instruments for execution, such as option types, swaptions, and collars. Hedging with Statistics NESA Energy Journal, March 1998 - This article explains the basics of how to leave behind hedging approaches that rely on forecasts or require experienced, yet human, traders to execute. The three step process described therein is based on the assumption that people, no matter how astute, can't consider all the factors that can impact a market in the medium term. Statistical methods, therefore, are necessary. The first step of this process is to determine ones exposure and risk appetite. The second step is developing a mechanical approach to hedging using statistics. The final step is the selection of reasonable instruments that are to be used in the hedging process. Hedging is an Option for Producers American Oil and Gas Reporter, October 1997 - This article deals with the critical issues involved in deciding whether or not to hedge basis and the potential benefits. The first issue is the importance of correlation between the hedge instrument and the underlying exposure. How much risk one would have if they were not hedged is another critical issue and the article presents solutions on how to estimate risk. Spikes in prices, especially as bid week approaches, present another challenge to the hedger. The article discusses how these spikes may be smoothed and the associated risk mitigated. Opportunities to benefit from hedges are then addressed in closing. Using Probability and Monte Carlo Simulations I Natural Gas Hedger, Aug./Sept. 1995 - The first part of this two part article deals with managing discretionary trading risk, which is the risk of lifting a hedge and resetting it at a different level. This article addresses the use of probability theory and Monte Carlo simulations in setting trading limits and assessing the probable outcome of discretionary hedging activities. To illustrate this concept there are multiple examples with charts that are easy follow. These ideas can be used to both assure management that the volumes being traded are such that the firms risk parameters are adhered to and to assess what trading results are probable given past performance. Using Probability and Monte Carlo Simulations Part II Natural Gas Hedger, October/November 1995 - This article examines the difference between trending and random markets, and the relationship of volatility and risk. The article begins with a review of the basic concepts of normal distribution and how it applies to Monte Carlos and then studies how these simulations may then be utilized to understand volatility. The article supports these points with both statistical and graphical evidence. Locking in Storage Profits Through Hedging Natural Gas Hedger June/July, 1995 - By selling gas and buying futures in a differed month, traders are able to lock in profits and free up storage. Using historical charts to evaluate futures spreads will provide a useful tool in determining when to use this effective method. Hedging Without Futures National Petroleum News, October 1993 - For some firms managing price risk with futures is simply not practical, especially if the firm sells less then 100 contracts, but they are not out of luck. Many rack suppliers provide price protection in the form of price ceilings and fixed price contracts, thus the interaction of the exchange is displaced to the supplier. More complex alternatives are also addressed. These take the form of second chance pricing, double-discount pricing, call and price and average pricing. Why Bother with Futures National Petroleum News, June 1993 - Description Futures and Flexibility National Petroleum News, August 1993 - This article discuses the flexibility allowed to hedgers to protect profits through the use of the EFP. The articles defines the EFP (Exchange for Physical) and gives examples of how a producer and consumer can be mutually satisfied by utilizing this tool. EFP's are also useful in instances when there is no liquid futures market, and even in liquid markets, where slippage is low, can save the executor money. Defining Risk Management: A Strategic vs. Tactical Approach NYMEX Energy in the News, Fall 1992 - This article discusses strategic versus tactical approaches to risk management by providing examples of each approach and explains why it is important to realize the distinctions among the different approaches. The article does this by defining strategic risks and tactical risks and assists the reader in knowing when to use which approach. Volatility and Spreads IPE Pipeline, November 1992 - In this study the IPE and NYMEX gasoline futures contracts are used to illustrate basic points on volatility and spreads, such as how it can be measured and how differing volatilities in two markets can affect the success of an arbitrage trade. The study first presents three alternative definitions of volatility and true range. Then the affects of volatility on spreads is examined in four detailed case studies with supporting tables and charts. Hedging Made Easy: A Guide for the Do-It-Yourselfer NYMEX Energy in the News, Winter 1991/1992 - This article discusses energy swaps and the steps needed to hedge your energy exposure yourself utilizing swaps. With a few simple tools and a little bit of time, the article shows how hedgers can avoid paying margin, avoid paying the swap dealers profit and obtain greater control over the hedging process. The article allows for slight overhead by the hedger and gives step by step instructions to follow. Additionally this article examines how to do the math for a calendar swap. In most cases, the hedger will find that they can improve their swap prices with good hedge management and executions. Analyzing Basic Fundamentals of the U. S. Energy Market Futures, October 1991 - This article examines the API statistics (the American Petroleum Institute's Weekly Statistical Bulletin) and other fundamental factors related to the US oil market. The API is a weekly oil and petroleum product storage report that provides valuable information on storage levels and thus supply and demand. Although reporting is voluntary and often the data is five to twelve days old, the API can be a useful trading tool. Futures Enhance Wet Barrel Trading in Specialized Markets NYMEX Energy in the News, 1988 - This article deals with the use of futures to establish a price and to hedge a profit margin in NYMEX related markets, such as oil and gas. There are three methods that the article discusses in which the above goals may be met. The first is optimizing the basis. In using this method one may be able to make an additional profit. The second is hedging the basis, which involves hedging the differential between two locations when the market is illiquid. The final method is managing market-related purchases, in which futures are bought to lock in prices in situations where the final purchase price will not be determined until loading Thinking Persons Guide to Hedging Energy Risk, November 1994 - As the title implies this is a technical article that discusses methods of locking in prices at levels that will assist in reducing risk. This is done in the article by discussing ways to improve hedges by using short term risk management techniques as well as long-term passive hedges and the methodologies that help to reduce risks. The article discusses ways to choose prices at which to hedge including such criteria as what the fundamentals indicate, current economic factors, and statistical analysis of the historical strip price, to help us determine whether a hedge will provide benefit compared with doing nothing at all. How to Cash in on the Cash Market Energy Risk, March 1996 - Managing risk in the cash markets does not have to mean hedging exposure and then crossing ones fingers. This article details how to measure risk and provides graphical and numeric examples of this process. In addition the article identifies the various forms of risk taking in the cash market and details possible solutions Look Before You Leap Energy Risk, April 1994 - The article addresses basic philosophical and technical steps to ensure the success of risk management programs. By discussing the nature of price risk, establishing goals for risk management programs and ensuring that risk management programs are realistic, the article puts risk management theory into context. The article takes into consideration that strategies do vary according to risk appetite and financial structure of companies. Sailing With the Wind Energy Risk, July 1994 - One of the biggest challenges facing risk managers is deciding whether a market is trending, for without a clear idea as to the markets direction a risk manager is lost. This article addresses this problem by introducing market timing, a type of technical analysis that evaluates trends, momentum, statistical significance and patterns. The article presents a hypothetical company and uses it, in conjunction with historical data, to show the techniques used in market timing. The hypothetical study is richly supported by numeric examples and graphs.

Primarily Trading Related

Calendar Spreads vs. Price - Is There A Relationship? NYMEX @ the Market , March 2008 - This article discusses the results from a detailed study done by Kase that examined the relationship between energy market calendar spread and prices and answers the questions as to their relationship with one another and if that relationship is useful to a trader. How Well Do Traditional Momentum Indicators Work IFTA Journal , November 2007 - This article examines the effectiveness of signals generated by different types of momentum indicators including Stochastics, RSI, MACD and two proprietary Kase indicators called the KaseCD and Kase PeakOscillator. A Divine Tool Energy Markets, July/August 2005 - This article describes the use of the special number phi for forecasting and trading methodologies using technical analysis. Setting Stop-Losses Using Price Volatility The Technical Analyst, July/August 2005 - This article looks at setting stop-loss orders using range, volatility, and volatility skew. The Kase DevStops, which use this type of analysis are discussed at length in this article. There is also an in depth study of volatility and skew that is discussed in the article. This is a must read article for anyone that is using stop loss orders Tools for Technical Analysis Energy Markets, April 2005 - This article examines the different types of tools that technical analyst use on a daily basis to read the markets. This article is an introduction to technical analysis and how the different types of tools such as momentum indicators, candlesticks and geometric patters can help one to become a better trader on a consistent basis. Proof That Technical Analysis Really Works: Momentum Indicators Commodities Now, March 2005 - This article shows the proof that technical momentum indicators really do works. It covers a published study that was performed by Kase on over 300 years of daily data on a range of commodity markets from grains, energy, currencies and indexes. The article shows the hard fast numbers and shows proof that technical indicators can predict market turns and behavior. The Two Faces of Momentum Stocks Futures & Options October 2003 - This article covers different aspects of momentum indicators. The article starts by giving a brief review of how to identify momentum exits. The article then covers a study that Kase did on the two faces of momentum. In the study, we compared different indicators based on how often a turn was proceeded by a signal and how often a signal was followed by a turn. These two sides of momentum are necessary to properly compare momentum indicators. Daytrader’s Doom Futures, August 1999 - A whipsaw trade is entered too late or too soon. This article looks at four basic principles used to avoid the whipsaw trade. The first is to select the proper bar length. Enter a trade on a tick bar that is sensitive and then scale up to a larger time bar to let profits grow. The second is to be conservative when entering a market. Use second signals in the direction of the trend, or use a higher less sensitive entry time frame. Third, cut your losses with properly set stops. Range is risk, so set your stops accordingly. Last, exit on turn signals. Momentum indicators such as "overbought" and "oversold" can be used effectively to exit trades and preserve profits. Managing Trade Risk Trader's Catalog & Resource Guide, July 1999 - An individual investor may have a good idea how much she is willing to lose on trading in the longer term, that does not necessarily translate into how much to risk in a given transaction. This article outlines a simple system of "risk of ruin" which is amply supported by examples with both hard numbers and charts. This system works well for managing risk on individual investments by placing stops effectively. The article makes use of an indicator called the Kase DevStop which is effective at identifying stop points. The Best Momentum Indicators Bridge Trader, May/June 1997 - This article outlines the basic indicators and identifies some of their limitations, which prevent them from being more than cursory tools with which to assess the market. The heart of the article describes new indicators that have been developed and how these indicators function. These are: The Kase Serial Dependency Index (SDI) and the Kase Peak Oscillator. With these Kase indicators are as close as is practical to understanding true market behavior as well as capturing highly valuable insight into market behavior. Technical Differences and Similarities: Energy and Power Natural Gas Journal, Jan. 1997 - Addresses how similarities between energy and power may allow traders to effectively trade power. Although the similarities are many there are two main differences that are very important. These are lack of liquidity in power and the inability to store power which makes it more susceptible to disruptions. Building a Trading Framework Futures, November, 1996 - Market timing should never take place in a vacuum. This article explains how to construct a "forecast grid" that provides a framework that provides a higher degree of accuracy and confidence in trading. The methods for building a trading framework stand on a foundation of math and keeping things simple while following a clearly outlined step by step format. Statistics in Action Futures, June 1996 - This last in a series of three articles dealing with Kase indicators explains how to combine the four indicators introduced in the two prior articles and walks readers through a trade utilizing the KaseCD (KCD), PeakOscillator, Permission Screen and the DevStop. Examples are given on how to utilize these indicators and recognize warning signs based on simplified trade rules. Multi-Dimensional Trading Futures, May 1996 - This second in a series of three articles on Kase proprietary trading tools, covers a statistically based momentum indicator, the KaseCD, which supersedes the MACD. A review of the highly accurate stop system, DevStops is presented. Also explained is filtering in a higher time frame and three simple rules for using a new statistical screening system, the Kase Permission Screen, to generate "permission-long" and "permission-short" signals. New High-Probability Indicators NYMEX Energy in the News, Spring 1996 - These articles introduce to the reader indicators which are not bound by the limitations of the old traditional indicators. These indicators are the Random Walk Index (RWI) which is more accurate, less lagging and causes fewer late whipsaws than a standard moving average crossover system. The second indicator is the PeakOscillator which is normalized for range, as opposed to the local conditions of the Stochastic, and it has a higher degree of reliability relative to momentum divergence. The third indicator is the Kase CD (KCD) which is essentially an upgrade on the traditional MACD. These indicators have all been shown to be highly effective. Putting the Odds on Your Side Futures, April 1996 - This first of a series of three articles explains how statistically based indicators can outperform standard trading tools. An introduction to Kase proprietary trading tools, especially the PeakOscillator, a momentum indicator, and stop system, the Dev Stops, as well as a discussion of basic statistics and probability, including a review of the traditional bell curve is presented. The Kase Dev-Stop: Accounting for Volatility, Variance and Skew International Federation of Technical Analysts,  Journal 1994 - This technical article discusses the development process, supporting research, findings and dissatisfaction of volatility and stop systems in use that led to the development of the Kase Dev-Stop. The Kase Dev-Stop uses various corrected* standard deviations above the mean to account for variance and allows the user to quantify the odds of being stopped out based on a normal distribution, and it is based on a 2-bar reversal. The article discusses in great detail variance, 5 steps to calculate the Dev-Stop, an explanation of how to use the three levels of stops and trade entry techniques and methods. The Kase Dev-Stop, unlike previous stop designs, accounts for variance, is tri-level to account for different market conditions, is quantifiable in terms of the percent chance of being stopped out (hitting a stop) and accounts for volatility skew. Also, we find that in using the Dev-Stop with Bollinger bands, appears to assist in automatically defining support in sideways formations, and will assist in confirmation of trends resuming. The Dev-Stop is useful in trending and non-trending markets and can be used in any time frame, down to the tick level. Simplified Momentum Filters Improve Trading Futures, December 1993 - This article discusses the slow-stochastic, a sensitive momentum indicator. The stochastic indicator determines price ranges for certain periods of time and then calculates the most recent price's correlation to that range. Proper use of the stochastic is designed to eliminate the need to watch multiple charts and to free the user from rigid and sometimes misleading weekly data. The use of the slow stochastic over longer time frames helps the trader to overcome lag that is inherent when using longer time frames, especially considering research has shown us that momentum signals often precede trend-following signals. The article also suggests employing filtering indicators using the stochastic as the filter and following a set of three conditions that are discussed in detail. These three conditions follow the mandate of keeping things simple, as they do not require much technical know-how to implement. Momentum Divergence NYMEX Energy in the News, Fall/Winter 1993 - This article studies the momentum indications that occur prior to reversals in the direction of the market. First the article gives an overview of three common momentum indicators and what they measure; these are the Stochastic, Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) histogram. While each indicator has its entry and exit signals and rules the main signal is momentum divergence. The article examines in detail momentum divergence and uses a case history in heating oil as an example. Redefining Volatility and Position Risk Technical Analysis of Stocks and Commodities, Oct. 1993 - Volatility is the key to understanding market behavior. This article builds on this with methods in which volatility is used and how these methods may be made to "breathe" with the market. In addition the shortcomings of using volatility to set stops are brought to light in some detail; these are variance and skew. It is an understanding of volatility that leads to the design of the dev-stop, a stop-loss method explained in the article. The dev-stop idea is well supported both mathematically and graphically in the article. Choosing a Time Bar Length Technical Analysis of Stocks and Commodities, August 1991 - Most trading days do not divide evenly into conventional time fractions often used in trading, thus leading to an end of day bar that represents only a fraction of the time desired. This article presents several ways of dealing with this issue, with special emphasis on the use of Fibonacci numbers and weighting the end bar that pertains to the end of day. In addition the article presents graphical evidence of the importance of choosing time bar lengths and how these methods can allow earlier trading signals. Knowing When to Step Back From the Market Futures, June 1991 - This article spells out a method to help identify when to step back from a market. This method involves risk assessment using volatility as well as the Average Directional Movement Index (ADX) and Directional Movement Index (DMI). The article provides excellent examples supported by historical data as well as charts. Using Stochastics to Forecast Market Moves NYMEX Energy in the News, Spring 1991 - This article focuses on the use of the stochastic for estimating market moves. It begin with the basics of what the stochastic is, basically an expression of the position of the close relative to the high-low range of the market. The article then identifies two stochastic formations helpful in estimating market moves, the double bottom retracement and double money breakthrough. In summary the article illustrates how, by watching the direction and strength of price movements, a firm can determine important buy or sell signals which will ensure efficient trading of energy markets.

 

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