Below is an illustration trading futures options on Crude Oil. Our post shows bullish and bearish positions using a combination of call and put options.
Trade Options on Futures
Crude Oil * Directional & Neutral Positions
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Term Structure
Volatility
Options fall into the category of being slightly overvalued in volatile markets in the weekly options report. Ask about the Weekly Option's Report for more information.
Notes:
Contract Size - 1,000 barrels.
Tick Size: Outright: dollars and cents with 0.01 points=$10
Trading Hours: CME Globex: Sunday - Friday 6:00 p.m. - 5:00 p.m. Eastern Time (CST).
* Tip: Understanding what the numbers mean when looking at Crude Oil prices. The quotation you see is U.S. dollars and cents per barrel (42 gallons). Each contract you are buying or selling is 1,000 barrels. A 1 tick move is $10 USD calculated as $0.01 x 1,000 barrels.
?ml=1" class="modal_link" data-modal-class-name="no_title">* Tip: Click here to read a helpful tip about Crude Oil futures and options
Charts
Prices have fallen significantly.
WTI down 10% historic low with a substantial move lower hinging whether Russia with OPEC would cut production. They aren't going along with production cuts so much uncertainty which was a drop on oil prices. Levels are back to 2016 levels. Lots of volume in the April contract..
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?ml=1" class="modal_link" data-modal-class-name="no_title">* Tip: Click here on enlarging images
Strategies
Below illustrates a directional play to the upside using a call vertical swap. Alternatively, beneath is a bear call spread to the downside.
The % yield shown in the diagrams below represent an estimated return on margin from projected dates shown below. The structure has positive time decay which is an advantage over holding outright options.
Vertical Swap Bullish
Bear Call
Assuming oil continues down further. Volatility is at its highest in the upper 99th percentile.
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