Energy markets yesterday gave back most of the gains from Wednesday's session as larger than expected demand destruction in OECD nations looks to have trumped concerns over non-Opec supplies. Inventory data throughout the developed world continues to remain at record low levels, possibly preventing a continuation of the sharp move lower we have been witnessing.
Crude prices at levels $30 below the highs do not appear to have renewed demand growth.
Instead, with markets expected by many to continue consolidaing around $110, current levels look like an excellent opportunity to adjust consumer hedges ahead of a potential move higher in 2009. With this in mind, the 1st half of 2009 $130 / 170 call spread can be owned for Zero Cost by selling the $95.50 put in the same time frame. This trade allows a full $40 of upside protection for every month from January to June of 2009. the protection is paid for by selling the $95.50 put, $20 below the current flat price.
Thursday, August 14, 2008
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