July 25, 2007
What we’re watching today:
Oct. 2007 Crude Oil (NYMEX) jumped $2.40 today to $75.80 per barrel, an increase of 3.3% over yesterday. What sparked the rally after crude’s three-day fall from the $76 level to $73?
According to MarketWatch.com, not much.
There was no news, and the morning’s inventory report was “fairly neutral, yet there’s a short covering of positions.” Other news pointed to a brief technical glitch that caused the CME to halt some trading on its Globex platform, allowing floor traders to run up market and trigger buy stops.
Crude has been on a steady move up since June, but strong supplies, a lack of tropical weather concerns and a fairly quiet Middle East may signal a short-term dip in crude is on the horizon that we can capture.
Buying the Oct. 70 Crude Oil Put option would be one way to take this trade, as we expect prices for Crude Oil to fall. Your loss would be limited to what you pay for the option (which today closed at $1.15, which would be about $1,150), plus commissions. Your goal would be to close out half of your position at the $2.50 to $3.00 level, and the other half around $4.00.
What we’re watching today:
Oct. 2007 Crude Oil (NYMEX) jumped $2.40 today to $75.80 per barrel, an increase of 3.3% over yesterday. What sparked the rally after crude’s three-day fall from the $76 level to $73?
According to MarketWatch.com, not much.
There was no news, and the morning’s inventory report was “fairly neutral, yet there’s a short covering of positions.” Other news pointed to a brief technical glitch that caused the CME to halt some trading on its Globex platform, allowing floor traders to run up market and trigger buy stops.
Crude has been on a steady move up since June, but strong supplies, a lack of tropical weather concerns and a fairly quiet Middle East may signal a short-term dip in crude is on the horizon that we can capture.
Buying the Oct. 70 Crude Oil Put option would be one way to take this trade, as we expect prices for Crude Oil to fall. Your loss would be limited to what you pay for the option (which today closed at $1.15, which would be about $1,150), plus commissions. Your goal would be to close out half of your position at the $2.50 to $3.00 level, and the other half around $4.00.
What can keep Crude rocketing up through the roof? Some reports say $100 Crude is not far off, but the driving factor will primarily be hedge funds and their hot money. But remember, while hedgies are quick to get on the bandwagon, they are even faster to get off. (Check your charts - remember the free-fall oil took last August, diving from $75 to less than $60 by October?)
Futures and options trading is speculative and involves a high degree of risk. The risk of loss can be substantial. Neither the information presented or any of the opinions expressed constitute a solicitation for the purchase of sale of any commodities.
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