Kim 

Can you print me two copies in color.

John
---------------------- Forwarded by John J Lavorato/Corp/Enron on 12/20/2000 
06:39 AM ---------------------------


Stinson Gibner@ECT
12/19/2000 05:55 PM
To: John J Lavorato/Corp/Enron@Enron
cc: Zimin Lu/HOU/ECT@ECT, Vince J Kaminski/HOU/ECT@ECT, Hector 
Campos/HOU/ECT@ECT 

Subject: Updated WTI Trading Simulation

John,

The updated model does not give answers too different from the earlier 
version.   The changes made were in correcting the handing of contract rolls 
and correcting some of the roll dates.

The model still gives a higher profit, sometimes, for the cases of 1,000,000 
bbl position limit vs.  5,000,000 bbl limit.   I took a look in detail at the 
5 MM bbl case which gave lower profit (3 yrs out of Nov 95).   The intuition 
is that there are two offsetting things which happen when you raise the 
position limit.

1) you have a larger position to profit from when the market reverses a 
trend, but
2) you loose much more money in a long term trending market, and to the 
extent that you still hit your position limit, you will not make it all back 
when the market reverses.

In the specific above case, you hit the position limits for both 1 MM bbl and 
5 MM bbl, and the superior strategy is a trade off between limiting losses 
vs. having a larger position from which to gain on major market reversals.

--Stinson

Open to Close   Continuous trading