Dual Edge Research publishes two powerful newsletters that work great individually — and even better together. The Bull Strangle Newsletter focuses on stocks and options, combining stock ownership with premium-selling strategies to generate consistent income and market-beating returns. The Smart Spreads Newsletter specializes in seasonal commodity futures spreads, offering a diversified approach with low correlation to equities. Together, they deliver a complete investment perspective — one focused on income, the other on diversification — all under one simple subscription.
Introduction
Last week, we looked at the potential for seasonality and geopolitics to align in the near future—specifically how agricultural markets were approaching seasonal highs at a time when geopolitical tensions could reinforce those moves. When both forces point in the same direction, prices can accelerate quickly and extend beyond their typical ranges. This week, the focus shifts to the opposite dynamic:
- What happens when seasonality and geopolitics conflict?
The answer is more nuanced—and far more instructive.
To frame this visually, the chart separates the behavior into three distinct components. The black pattern represents the current year’s actual price action. The blue pattern reflects the historical seasonal tendency over the past 15 years while the red is the seasonal tendency for the past 5 years.
A Case Study in RBOB Gasoline
The chart above highlights a butterfly spread in RBOB gasoline, showing both seasonal patterns and recent price action. The setup was clear:
- The seasonal tendency pointed lower
- The trade structure reflected that expectation
- Historical patterns were consistent across multiple years
Then, in late February, a geopolitical shock entered the market. The escalation of tensions involving Iran introduced a sudden wave of uncertainty into the energy complex. As expected, gasoline prices reacted quickly. The spread moved sharply against the seasonal direction, creating a temporary disruption in what had otherwise been a stable pattern.
The Immediate Impact
Geopolitical events tend to produce fast, emotional moves:
- Supply concerns get priced in rapidly
- Risk premiums expand
- Markets overshoot
That’s exactly what happened here. The spread widened abruptly, diverging from its seasonal trajectory. From a purely technical perspective, it looked like a breakdown in the pattern. But it wasn’t.
The Key Distinction: Temporary vs Structural Forces
This is where understanding the difference between structural behavior and event-driven volatility becomes critical. Seasonality is not a forecast. It is a reflection of underlying physical and economic realities:
- Refinery cycles
- Inventory flows
- Demand patterns tied to weather and consumption
Geopolitical events, by contrast, are:
- Sudden
- Unpredictable
- Often temporary in their impact on price relationships
They can distort prices, but they rarely change the underlying structure.
What Happened Next
After the initial shock, the spread began to stabilize. The geopolitical premium that had been injected into the market started to fade. As it did, the spread gradually moved back toward its historical path. By early April, the trajectory had realigned with the seasonal pattern. Seasonality reasserted itself.
Why This Matters
This example highlights an important principle: geopolitics can interrupt seasonality—but it doesn’t usually replace it. For traders, this creates both risk and opportunity. When geopolitics conflicts with a seasonal setup, drawdowns can increase, trades may temporarily move outside expected ranges, and confidence in the structure can be tested. These periods can be uncomfortable, as price action appears to diverge from the expected path. At the same time, if the underlying structure remains intact, these dislocations can create opportunity. Overreactions often provide better entry points, and as the geopolitical premium fades, the eventual reversion to seasonal behavior can become even more pronounced.
A Framework for Interpretation
When a seasonal trade moves sharply against its expected direction, the key question is:
- Has the structure changed—or has the market overreacted?
In the case of RBOB gasoline, the answer was clear in hindsight:
- An external shock drove the move
- Not by a shift in supply/demand structure
- Not by a breakdown in seasonal behavior
That distinction allowed the trade to be understood—not abandoned.
Final Thought
When seasonality and geopolitics align, markets can move faster and further than expected. When they conflict, geopolitics may temporarily disrupt price—but seasonality often determines where the market ultimately settles. Understanding that distinction is critical, especially during periods of heightened volatility, where short-term price action can obscure longer-term structural behavior.
These types of setups—where structure, volatility, and timing intersect—are the focus of the Smart Spreads newsletter, where each week is centered on identifying high-quality seasonal opportunities and navigating the conditions that can temporarily distort them.
More Information
Now you can get two powerful newsletters — for one simple price!
- For stocks and options, the Bull Strangle Newsletter shows you how to combine stock ownership with dual option selling — a disciplined strategy that has consistently outperformed the S&P 500.
- For commodity futures, the Smart Spreads Newsletter focuses on seasonal commodity spreads — a proven, low-correlation approach that thrives in all types of markets.
Each newsletter is designed to deliver consistent income on its own — but when used together, they create a complete, diversified trading approach that works in any market environment.
Visit BullStrangle.com to subscribe for just $1 for the first month.
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Darren Carlat
Dual Edge Research
(214) 636-3133
DualEdgeResearch@gail.com
Disclaimer
This information is for informational purposes only and should not be considered as investment advice. Past performance is not indicative of future results, and all investments carry inherent risk. Consult with a financial advisor before making any investment decisions.
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