Crude Oil fundamentals are pointing lower in my opinion, the Hurricane season is close to ending. Gulf platforms are back online, shale production remains strong, and data from the EIA per yesterday’s gov’t data is showing strong builds of crude oil. Also providing stability to the oil outlook in my view is both OPEC and non OPEC areas possibly promising to keep Oil flowing. Also of note China’s oil output is still increasing despite this recent drop in equities, and in my view this has slowed global demand for Oil. In my opinion I look for Oil to go lower towards $63.00 basis January 19 futures. With this in mind consider the following trades:
The January option settles December 14th 1:30pm 50 days to expiration tic value $10.00 per 0.01
Looking at lower futures pricing….buy the 65.00 put pay 1.54 = $1540.00, buy the 64.00 put pay 1.29 = $1290.00, buy
the 63.00 put pay 1.06 = $1060.00, to enter the trade. The risk is the price of premium paid plus commission and associated cost.
A higher risk short option strategy is buy the 63.50 p 1.19 = $1190.00 and sell the 71.50 call 1.02 = 1020.00 so pay .17 for the strategy =$170.00. What you are paying in premium is what you are willing to risk for the above trade plus fees and associated costs per transaction. Also to help protect this trade is to add a stop at 71.50 in Crude Oil futures.
A contrarian view or an Oil shock geopolitical event, buy the 69.00 call pay 1.91 = $1910.00, buy the 70.00 call pay 1.46 = $1460.00 or the 71.00 call pay 1.19 +1190.00 to enter. What you are paying in premium is what you are willing to risk for the above trade plus fees and associated costs per transaction.
Peter Ori.
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