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 undervalued 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
* Tip: To view a larger chart image, simply right click on the image with your mouse. Next, select view image. Be sure to click the back arrow on your browser to go back to the original page.
?ml=1" class="modal_link" data-modal-class-name="no_title">* Tip: Click here on enlarging images
Strategies
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.
Below is a bear call spread.
A variation is a vertical swap which is a bit more forgiving to the upside though much less positive theta on time decay. Margin requirement is substantially less than above.
Below is a more aggressive bearish calendar fly with positive vega taking advantage of a theoretical edge if implied volatility were to suddenly spike. It is directionally bearish.
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