Crude oil dropped below $115 on Friday as renewed selling served to push the market to the bottom of the recent range. This, in spite of continued tensions between Georgia and Russia surrounding key pipelines carrying crude oil to Turkey from the Caspian Sea. Adding to the pressure was the continuing strength of the U.S. Dollar and inflation fears which have presently been pushed to the background.
Consumer hedgers can now lock in a price ceiling of $120 for the remainder of the 2008 calendar year with the October through January $120 call. The price ceiling is paid for by locking in a price floor at the $111.50 level for the same time period. As this is a zero cost trade, there is no premium at risk above the $111.50 level.
Sunday, August 17, 2008
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