The DeCarley Perspective Trading Newsletter

December Crude Oil Short Option Strangles

**There is substantial risk of loss in trading futures and options.

**Past performance is not indicative of future results

 

On the radar:

• Crude volatility is high, but so are option values...sell strangles.

 CL CL_F Crude Oil Futures

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 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!

This appears to be a rather high probability trade, but of course any time you are selling options naked there is theoretically unlimited risk.

Let me know if you have questions or would like me to help you to participate. We estimate the margin on this trade to be about $1,800.

DeCarley Trading a division of Zaner Group

Twitter:@carleygarner
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Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data.

**Seasonality is already factored into current prices, any references to such does not indicate future market action.

There is substantial risk of loss in trading futures and options.

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