Get started

Crude Oil

MCO: Options Strategy to Capture Crude Oil VolatilityNYMEX: Options on Micro WTI Crude Oil ( NYSE:MCO ), Underlying Futures: NYMEX:MCL1! Riding on last week’s story on TradingView, “Would the Middle East Conflict Push Gold and Oil Prices Higher?” let’s explore option strategy to hedge event risk. Last week, we’ve revisited the event driven strategy and how it could be leveraged to hedge event risk: • I observe that gold prices usually go up in the aftermath of a crisis, as evidenced by its 24% surge in six months after the start of the Covid pandemic. • If a crisis results in economic recession, crude oil prices would go down. Proof: WTI dropped nearly 80% one month after Covid, as lockdowns destroyed oil demand. • In the event of a war, oil prices shot up due to its strategic importance. Example: Crude was up 31% one month after the start of the Russia-Ukraine conflict. • What’s in store to hedge event risk? We explored long futures strategies on COMEX Gold and NYMEX WTI. For my original idea on event driven strategies, please read this: Are these strategies working? We can review them in real time. Micro Gold goes first: • On October 6th, the last trade day before event date (denoted as T0), Gold Futures (T0) = $1,845 per troy ounce for the leading December contract MGCZ3. • Price changes by time: at (T+1): $1,864.3, +1.0%; at (T+7): $1,941.5, +5.2% • Hypothetically, if we opened a long futures position at T0 price and hold it till now, our futures account will gain by $965 (= (1941.5-1845) * 10). • If we take the $780 initial margin deposit as cost base, our theoretical return would be +23.7% (=965/780-1), excluding transactions fees. For WTI crude oil futures: • Futures (T0) = $83.18 per barrel for December contract (CLZ3). • Price changes by time: at (T+1): $84.60, +1.7%; at (T+7): $86.35, +3.8% • Hypothetically, a long futures position would gain by $3,170 (= (86.35-83.18) * 1000). • The theoretical return would be +51.2% (=3170/6186-1), excluding commissions. • We could replicate this strategy using Micro WTI futures ( CSE:MCL ), which is 1/10 of the standard NYSE:CL contract and requires 1/10 of initial margin. Today, I would like to explore options strategy on crude oil, and hope to achieve better results in a cost-effective way. As we know, neither Israel nor Palestine is a major oil producer. So far, global oil supply has not been interrupted by this military conflict. Rising oil price is due to the “price shock” arising from a geopolitical event. However, if the conflict intensifies, it could drag other oil producing nations from the region into conflict. At wartime, there is a real risk of oil field sabotage or blockage of major shipping routines. Either one could result in an oil supply shortage. If you can’t buy a bar of gold, you could choose alternative investment options like bonds or bitcoin. But if we don’t have oil, all other energy sources combined are not sufficient to fill the gap. We would not be able to refill the gas tank. Delivery trucks could not ship meat and vegetables to local grocery stores. There will be a real crisis. Options Strategy with Micro WTI Crude Oil Options In its first week, the conflict has already resulted in thousands of casualties. With the ground fighting in Gaza due to begin any time, the conflict could quickly get out of control in the coming days and weeks. For a comparison: Last year, WTI went up 5.7% one week after the start of the Russia-Ukraine conflict. By the end of the first month, crude oil was up 31%. This time, WTI went up 3.8% in Week 1. Where will oil price be at T+1M? With a “Risk On” scenario like last year, it could go up another 25%, reaching $105 or higher. However, a long-only futures strategy runs the risk of oil price going down. In this rapidly evolving event, senior US officials are in the Middle East negotiating for a cease fire. If peace is achieved, it is good for the world. How do we hedge a long-futures position in a “risk-off” scenario? We could consider a Call Strategy with the Options Contract ( NYSE:MCO ) on Micro WTI Crude Oil Futures ( CSE:MCL ). In the following example, I would illustrate the theoretical payoffs between a long futures position on MCL and an out-of-the-money (OTM) Call with MCO. Market prices and assumptions: • On October 13th, settlement price for MCLZ3 was $86.35/barrel. • For a simplified example, assume there are two possible outcomes in one month. Risk-On: WTI goes up 20% to $103.62. Risk-Off: WTI goes down 20% to $69.08. Futures Trade: • Buy MCLZ3 at T0 settlement. Upfront investment is the $640 initial margin. • Risk-On: Position gains $1,727 (= (103.62-86.35) * 100). Return: +270% (=1727/640). • Risk-Off: Position lost $1,727 (= (69.08-86.35) * 100). Return: -270% (=-1727/640). • In actual trades, when the account balance drops below 22% of the initial margin to $140.8, the trader will be required to bring the balance back up to $640. Options Trade: • Buy a $95 call on MCLZ3 on T0 at $2.02 premium. Total premium is $202, as each contract is 100 barrels of crude oil. • Risk-On: Call strike will be $8.62 in-the-money (ITM, =103.62-95). At today’s market, the 77.75-strike at futures price $86.35 is $8.60 ITM. It is quoted $9.71. Using this as an approximation, we assume our options value to go up from $2.02 to $9.71. • Position would gain $769 (= (9.71-2.02) * 100). Return: +381% (=769/202). • Risk-Off: Call strike will be $25.92 OTM (=95-69.08). Today, the 112.25-strike is 25.9 OTC at current market price. It is quoted $0.58. If we sell the options at the open market, we will realize a loss of $144 (= (0.58-2.02) * 100). Return: -71% (=-144/202). Unlike the physically deliverable standardized WTI contracts, Micro WTI futures ( CSE:MCL ) and options ( NYSE:MCO ) are both financially settled. To exit the position, the trader will enter a trade at the opposite direction. In our examples, a Short December futures MCLZ3 will offset the Long position. For the options trade, selling the same call options will net out the existing position. What are the advantages of an options strategy vs. a futures trade? Firstly, the upfront investment could be much lower with an OTM call. In our example, it is $202, compared to $640 for futures margin. Secondly, a trader could design more complex trading strategies using options. There are multiple calls and puts to serve as building blocks, compared to only one futures contract for each expiration. Thirdly, options payoff is nonlinear. When you are on the right side of the market, the return grows exponentially larger as the call strike gets deeper in-the-money. In our illustration, the same price increase results in 380% gain for options, vs. 270% for futures. Finally, buying a futures contract could incur unlimited losses. If the market goes against you, you could lose more than the initial margin as you may be required to put in more funds to meet margin call. On the other hand, the maximum loss from buying a call or put is capped to the upfront premium. Happy Trading. Disclaimers *Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services. CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
NYMEX:MCL1!Long
by JimHuangChicago
1
UKOIL/CRUDE OIL - PUMP to 184$\5555In this tutorial idea, I have shown a custom numerological fib that can work as a support, resistance and buffer zone for local and global trend reversal. Also Gann, which indicates reversals in the trend and all this together can be used for both global and local work. Also we see that exactly from the high we have had 5555 days for the strong decline that is happening right now, I expect a test of the buffer zone and strong support at 0.444 fibs and a reversal up. Often, if they want to make a massive dump and trend reversal, a deep call is made behind 0.333 fib and even a possible test of 0.222 fib and after a strong decline, this did not happen, we gently touched 0.333 on day 5555 and flew down. Nothing more than a local knockout and liquidity gathering before the flight due to the complicated geopolitical situation.
TVC:UKOIL
by FTT_TRADER369
1
XTIUSD ( US OIL ) LONG term Trade AnalysisHello Traders In This Chart XTIUSD HOURLY Forex Forecast By Forex Planet today XNGUSD analysis 👆 🟢This Chart includes_ (XTIUSD market update) 🟢What is The Next Opportunity on XTIUSD Market 🟢how to Enter to the Valid Entry With Assurance Profit This Video is For Trader's that Want to Improve Their Technical Analysis Skills and Their Trading By Understanding How To Analyze The Market Using Multiple Timeframes and Understanding The Bigger Picture on the Charts.
FXOPEN:XTIUSDLong
by ForexPlanet20
USOIL Trading IdeaBased on Simple Technical Analysis ( Trendline + Support & Resistance ) Risk Disclaimer: Please be advised that I am not telling anyone how to spend or invest their money. Take all of my analysis as my own opinion, as entertainment, and at your own risk. I assume no responsibility or liability for any errors or omissions in the content of this page, and they are for educational purposes only. Any action you take on the information in these analysis is strictly at your own risk. There is a very high degree of risk involved in trading. Past results are not indicative of future returns. Good luck :-)
FX:USOILShort
by ShahedZare
Crude Oil's Double Bottom! Will Price Rally Above Sellers?With crude oil got rejected at 92, price has surged high and attempting to rise to seller's level above 90. Will price get rejected at this level or crude oil price will cruise above it to make a new high? N.B! - USOIL price might not follow drawn lines . Actual price movement may likely differ from the forecast. - Let emotions and sentiments work for you - ALWAYS Use Proper Risk Management In Your Trades #usoil #crudeoil #wti #brentoil
TVC:USOILLong
by BullBearMkt
CRUDE OIL (WTI) Your Trading Plan For Next Week 🛢️ What a pump on WTI Crude Oil. Following the geopolitical tensions, the market bounced nicely on Friday. Ahead I see a strong daily resistance: 88.4 - 88.6 area is the last resort for the sellers. If the price breaks and closes above that on a daily next week, it will be a strong bullish signal for you. You can anticipate a bullish continuation all the way up to 93.45 level then. Just remember, that first you need a breakout confirmation. ❤️Please, support my work with like, thank you!❤️
TVC:USOILLong
by VasilyTrader
13
WTI CRUDE OIL Buy SignalWTI Crude Oil hit twice the Rising Support and today is having the strongest green (1d) candle in 5 months. This is a buy signal assuming the line holds. Trading Plan: 1. Buy on the current market price. 2. Sell if the price closes a (1d) candle under the Rising Support. Targets: 1. 95.00 (Resistance 1). 2. 78.00 (little over Support 2). Tips: 1. The RSI (1d) is crossing over its MA line. If we close above, then it will be like the August 29th bullish break out. Please like, follow and comment!! Notes: Past trading plan:
TVC:USOILLong
by TradingBrokersView
2
Crude oil is poised to gain momentum Political tensions roiled global financial markets as the focus shifted to the Middle East. Oil prices have fluctuated sharply amid escalating risks, with worries that a war between Israel and Palestine could lead to supply disruptions easing, but market sentiment has been relatively cautious and investors have still refrained from aggressive selling as they watch further developments ahead. CBA energy analyst Vivek Dhar said that the disclosure of evidence of Iran's involvement will push up oil prices, and the conflict between Israel and Palestine increases the risk of crude oil prices rising to $100/barrel and above. Crude oil prices are bullish. The first target is 89, the second target is 93.
VANTAGE:CL-OILLong
by Anthony-Ryan
1
A new conflicts roils the oil marketOver the weekend, a new conflict broke out in the Middle East after Hamas, a designated terrorist organization, initiated an assault on Israel. This attack is already roiling the oil market, which saw oil prices rise more than 5% after the futures market opened. However, it is possible the impact has not been fully felt yet, considering the potential for further escalation amid Iran’s involvement in the preparations for the attack. Such developments could lead to broader conflict in the region responsible for producing one-third of global supply. That, in turn, could send the oil price much higher from the current levels (likely toward $100 and potentially even higher). As a result, we are closely monitoring the situation and will update our thoughts with the emergence of new events. Illustration 1.01 Illustration 1.01 shows the daily chart of USOIL. The yellow arrow indicates an opening gap. If the gap fails to be filled, it will bolster a bullish case for oil in the short term. Illustration 1.02 Illustration 1.02 displays the daily chart of USOIL and two simple moving averages. The yellow arrow indicates the initial return of the price in the upward-sloping channel (after the market opened). It will be bullish if the price re-enters the channel again and holds above the lower bound. Illustration 1.03 The picture above portrays the daily chart of MACD. If it fails to break below the midpoint and starts flattening, it will be a bullish sign. Technical analysis Daily time frame = Slightly bearish Weekly time frame = Neutral Please feel free to express your ideas and thoughts in the comment section. DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.
TVC:USOILLong
by Tradersweekly
Crude Oil (CL) Gap Fill LongWhile it's unclear whether crude, which has experienced large moves recently on account of the developing conflict between Israel-Hamas, wants to trade higher or lower over the longer-term, we’re looking to take near-term longs after filling the downside futures gap formed 10/6. We’re only showing down to a 30-minute chart here, but there are some smaller supply/sell zones @ ~84.25-84.75, which could be used for initial profit targets. If the trade works for a bounce, you can also consider applying mechanical targets @ 1:1, 2:1, 3:1, etc. Regarding an exact entry price and stop loss placement, the gap fill demand zone is a bit messy. The closing price of the gap itself, technically, is 82.81, so ideally we’d see CL trade to that #. However, markets aren’t always THAT precise, so it could put in a low at a slightly higher price. Furthermore, stop placement really depends on the timeframe used. The “distal” (lower bound) line of the daily demand/buy zone is 81.50, so if you can afford the risk, a physical stop could be placed below (never align your stops exactly w/ a zone’s range + don’t use whole numbers/quarters). More conservative placement could be slightly below 81.71 or 82.31, but there’s a higher chance you’ll be stopped out; depending on account/position size and risk tolerance, you can always deploy a “small loss, reenter” strategy. If you’re nimble enough, consider using a micro timeframe (single-digit minute, tick, or volume-based chart) to ID a trend reversal signal (higher high, higher low) before entering. If CL violates recently formed daily demand (82.81-81.50), be aware that there are “bear trap” areas waiting just beneath. Entries within the corrective segment of the uptrend that began in late-June are valid until prices breech the 77.59 pivot. As always, feel free to provide feedback and/or ask questions. Good luck, be smart, and enjoy the journey! Jon @ LionHart Trading
NYMEX:CL1!Long
by LionHart_Trading
Crude oil I've been watching oil closely for the last two months. I would like to say that oil is a trending instrument, we started the decline from 95$ per barrel and fell quite rapidly until the conflict in the Middle East. all news resources said that oil rose in price on the background of this news. Technically, I was waiting for this upward correction. But if the war will really be global, the price of oil should be cheap to strengthen the US and the dollar, and these goals began to be fulfilled. In what way? I have written about this many times, that what we trade is futures oil, in the financial market, and the main players in futures oil are City Bank, Goldman Sachs, JPMorgan Chase read more Best regards EXCAVO
TVC:UKOIL
by EXCAVO
2
WTI CRUDE OIL: Sell right at the top.WTI Crude Oil has completed the short term bounce we warned you of last week and the technical outlook remains neutral on the 1D timeframe (RSI = 52.922, MACD = -38.990, ADX = 32.850). The 4H timeframe is close to a Death Cross, the first one since May 3rd and that can form the LH at the top of a Channel Down. Our target remains the 1W MA50-1D MA50-S1 level (TP = 78.50). We will not consider buying before a MACD Bullish Cross on the 1D timeframe. Prior idea: ## If you like our free content follow our profile to get more daily ideas. ## ## Comments and likes are greatly appreciated. ##
TVC:USOILShort
by InvestingScope
4
Oil: Thoughts and Analysis Today's focus: Oil Pattern – Lower High Support – 86.00 Resistance – 86.87 - 89.12 Hi, and thanks for checking out today's update. Today, we are looking at oil on the daily chart. Since price started to week with a sharp gap higher, we are continuing to watch these new levels and whether they will become set on the medium or long term. Demand worries and peak price were a concern not too long ago as we saw prices move down to around the $82 level. Has this rally been a flash in the pan, and will sellers fill the gap? Or Has the dynamic changed in the short term, and could we see a new move from buyers to lock in these highs and re-test $89? Good trading.
EIGHTCAP:USOUSD
by Eightcap
Would the Middle East Conflict Push Gold and Oil Prices Higher?NYMEX: WTI Crude Oil ( NYMEX:CL1! ), COMEX: Micro Gold Futures ( COMEX_MINI:MGC1! ) Over the weekend, military conflict in Gaza between Israel and Palestine shocked the world. I condemn violence against civilians and pray for the victims and their families. In the following paragraphs, I will discuss how the prices of strategically important commodities, namely gold and crude oil, might respond to the eruption of a global crisis. Firstly, let’s look back into the recent past for those crises arising to a global scale. In the last five years, the world has witnessed three major crises of very different natures: • US-China Trade Conflict: from January 2018 to January 2020, the world’s two largest economies imposed import duties to each other in a series of escalating actions and retaliations. A major event occurred on September 18, 2018, where President Trump added 10% tariff on nearly all Chinese-made products. The US-China trade conflict forever altered the global supply chain, with its impact being felt till today. • Covid-19, the most severe pandemic in a century, from its outbreak in January 2020 to 2021. A big event that sparked market fear occurred on February 2, 2020, where the US imposed travel restrictions on incoming air passengers. • Russia-Ukraine Conflict: the first military conflict in Europe since World War II, from February 14, 2022, till now. Secondly, let’s measure how gold and WTI crude oil responded to these crises. For my analysis, I denote the day before Event Day as T0, where we may find last market prices before the impact hit. Event Day will be T+1, and then 1-week after (T+7), 1-month after (1M), 3-month after (3M), all the way through 1-year after (1Y). Here are what I found: US-China Trade Conflict • Gold spot price (T0) = $1,201.90 per Troy Ounce • Price changes by time: -0.1% (T+1), +0.1% (T+7), +2.3% (1M), +3.3% (3M), +8.6% (6M), +11.6% (9M), +25.0% (1Y) • Comment: Trade tension between US and China could push the global economy into a recession. Gold, a safe-haven asset, saw its market value growing 25% in a year. • WTI crude oil spot price (T0) = $69.86 per barrel • Price changes by time: +1.2% (T+1), +6.3% (T+7), +4.3% (1M), -27.7% (3M), -14.2% (6M), -24.6% (9M), -8.4% (1Y) • Comment: High tariff raised the price consumers had to pay, hence reducing demand. Crude was down 28% three months after the all-in tariff was imposed. Covid Pandemic • Gold spot price (T0) = $1,574.75 per Troy Ounce • Price changes by time: -1.0% (T+1), -0.1% (T+7), +2.6% (1M), +8.5% (3M), +24.4% (6M), +21.2% (9M), +16.6% (1Y) • Comment: We saw the biggest stock market selloff in March 2020. Gold price was down initially as stock traders needed to raise money and meet margin calls. However, a flight to safety eventually took place, and gold was up 24% in six months. • WTI crude oil spot price (T0) = $53.09 per barrel • Price changes by time: -5.0% (T+1), -11.9% (T+7), -77.1% (1M), -61.4% (3M), -23.1% (6M), -31.1% (9M), +0.9% (1Y) • Comment: Rapid Covid outbreaks stroke fear. Lockdowns put global activities to a pause. The pandemic wiped out oil demand, with WTI falling 80% in a month. April 20, 2020 made history as oil price of the expiring contract went below zero. As storage cost more than selling price, traders were willing to pay others to take away the crude for free. Russia-Ukraine Conflict • Gold spot price (T0) = $1,854.60 per Troy Ounce • Price changes by time: -2.5% (T+1), -2.5% (T+7), +6.5% (1M), -1.8% (3M), -2.8% (6M), -5.0% (9M), +5.0% (1Y) • WTI crude oil spot price (T0) = $91.25 per barrel • Price changes by time: +4.7% (T+1), +5.3% (T+7), +30.7% (1M), +12.90 (3M), +1.1% (6M), +0.6% (9M), -17.2% (1Y) • Comment: A major military conflict in Europe significantly raised the global risk level. Gold, the safe-haven asset, and crude oil, an energy commodity critically important in wartime, both went up in the first month, by 6.5% and 30.7%, respectively. • However, the impact was short-lived. On March 16, 2022, the Fed begin hiking interest rates, which has become the driving force in global market. Impact from Russia-Ukraine became a secondary factor and sat in the back burner. To sum up the above examples, I observe that gold prices usually go up in the aftermath of a global crisis. Crude oil has a mixed bag of reactions. If a crisis results in economic recession and a consequential reduction in oil demand, oil prices would go down. However, in the case of a major war, oil price would go up due to its strategic importance. Review: Event-driven Strategy focusing on Global Crises In June 2022, I introduced a three-factor pricing model for commodities futures: Commodities Futures Price = Intrinsic Value + Market Sentiment + Crisis Premium Intrinsic Value is the baseline cash price of the underlying commodities, determined by available supply, demand, inventory, shipping costs, and factors affecting these variables. Market Sentiment indicates if investors are bullish or bearish. Whether speculative investors place more money on the long side or the short side affects the price of a futures contract. Market sentiment could be either positive or negative, resulting in a price premium or a discount of the intrinsic value. The new Crisis Premium factor captures “Event Shock” during a global geopolitical crisis. Previous trade example: Russia and Ukraine together accounted for 28% of global wheat export. Wheat price shot up by 75% following the start of the conflict. I designed a Long Strangle options strategy on CBOT Wheat futures, and simultaneously bought out-of-the-money (OTM) call and put options. A “risk-on” outcome could push wheat price higher, making the calls more valuable, where a “risk-off” outcome would pull wheat price back down, making the puts in-the-money (ITM). Trading Opportunities with Micro Gold Since the September FOMC meeting, gold prices suffered a 6.3% drawdown, sending the futures price from $1,969 to $1,845. Friday settlement price was nearly 9% below the yearly high. On the one hand, high-interest money market funds beat out non-interest-yielding gold investment; on the other hand, strong dollar raised the cost of gold purchase by foreign investors. As a result, gold prices have been under pressure. However, my analysis illustrates that gold prices could rise in response to geopolitical conflicts. Since its founding, Israel had five major wars with its Arab neighbors. We do not know whether this time it would be contained as a regional conflict or spark a chain reaction of a global war. By the intensity of how it started, it doesn’t seem like a short one. To express a view of rising gold prices, we could consider a long position in COMEX Micro Gold Futures ( AMEX:MGC ). The December contract (MGCZ3) was settled at $1,845. Each contract has a notional value of 10 troy ounces, or $18,450 at market price. CME Group requires an initial margin of $780 per contract. Hypothetically, if gold futures go back up to $2020, its yearly high, the $175 ($2020-$1845) price increase would translate into $1,750 for a long futures position. If gold price goes down instead, each dollar of decline would result in a loss of $10 per contract. Alternatively, we could consider the newly launched Micro Gold Options. A Long Strangle Options Strategy, where simultaneously buying OTM calls or puts, could be deployed if we expect a big move in gold price, but not certain of its direction. Trading Opportunities with WTI Crude Oil Since June, WTI crude oil first staged a nearly 40% rise, from $67 going to $93. However, it has seen a 9% drawdown since the Fed meeting on September 20th. A major military conflict in the Middle East, the world’s most important oil producing region, threatens to interrupt oil supply and push up oil price. If the conflict is escalated to involve major oil exporting nations, the situation could be dire. To express a view of rising crude price, we could consider a long position in NYMEX WTI Futures ( NYSE:CL ). The December contract (CLZ3) was settled at $83.18. Each contract has a notional value of 1,000 barrels, or $83,180 at market price. CME Group requires an initial margin of $6,186 per contract. Hypothetically, if WTI futures go up above $100, which we saw from February to July 2022 in the first months of the Russia-Ukraine conflict, the $17 price increase would translate into $17,000 for a long futures position. If crude oil price goes down instead, each dollar of decline would result in a loss of $1000 per contract. Similarly, the newly launched Micro WTI Options could express a view that a big move in oil price is expected, without knowing its direction. Happy Trading. Disclaimers *Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services. CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
NYMEX:CL1!Long
by JimHuangChicago
35