Skin in the Game
Market: CL_F, CLZ12, Crude Oil
Original Trade Recommendation: Neutral premium collection strategy: Sell December crude oil $104 call and $80 put for about $1.14 ($1,140)
Original Projection: We suspect any rally will be limited to the $100 mark, and selling should find support in the mid $80s.
Update: Take a profit!
Original Trade Recommendation:
December Crude Oil Short Option Strangles:
Down $4.00 per barrel yesterday, up $3.00 today! As luck would have it, we exited our previous crude oil strangles (the 110/76 strikes) right before the market started getting frisky (and it was nice to avoid the stress that might have come with being in). However, it feels like it might be time to get back in. Excessive price changes in recent sessions allow traders to collect attractive premium for options nicely out of the money. Specifically, we like the idea of selling the December $104 call and the $80 put for about $1.14 or $1,140. The futures price is at $91, so we have plenty of breathing room on both sides of the trade. Assuming this trade is held to expiration, the trade is profitable between about $103 and $79, the max profit of $1,140 comes into play if the market is between $104 and $80 (see chart above) but don’t forget, there is unlimited risk of loss in option selling!
Ring the cash register! You should be able to buy this strangle back for about 59 cents, a profit of $550 in about two weeks per strangle. These options still have 30 days to expiration, which leaves a lot of time for things to go wrong. Also, once the option value gets in to the 20′s, the erosion slows down considerably.
**There is unlimited risk of loss in option selling!
Futures, Options, Integrity
There is substantial risk in trading options and futures. Doing so may not be suitable for everyone. These recommendations are a solicitation for entering into derivatives transactions. All known news and events have already been factored into the price of the underlying derivatives discussed. From time to time persons affiliated with Zaner, or its associated companies, may have positions in recommended and other derivatives. Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Website administrators, affiliated brokers, employees etc. may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.