US demand figures from Wednesday took centre-stage in trading yesterday as energy markets sold off across the board. Product demand is showing a 7.1% decrease in September from the same period a year ago. Traders are watching the outcome of the US House of Representatives vote on the bail-out package. Unfortunately, while a "no" vote may result in a financial meltdown, a "yes" vote may cause nothing more than increased volatility across all markets.
Option volatility returned in front-month crude oil yesterday, although consumer hedgers have stepped back into the market to buy cheap upside protection in the form of call spreads. The WTI Q4 $100/115 call spread strip can now be owned for an average price of only $2.20 per month. That's $2.20 of total exposure in a market that is moving more than $5 per day in any given direction. The $2,200 of risk buys the consumer hedger $12,800 of protection per month, or $38,400 of total Q4 protection.
Singapore 10/2/2008 0759
Friday, October 3, 2008
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