Equity and commodity markets fell sharply yesterday, quickly erasing Monday's gains, as traders focus on the near-term economic fallout of the current banking crisis. Opec, meanwhile, spoke out yet again on the impact on demand from the economic turmoil. It is a near certainty at this point that the cartel will cut production at its emergency meeting on November 18th. This usually bullish announcement had no impact on the market, as front-month November WTI crude has pushed below $73.50 in early Asian trading.
Despite the increase in implied volatility, consumer protection strategies have become increasingly cheaper as the market moves lower. It is now possible to lock-in crude prices below $100 for the entirety of the coming year by purchasing the Cal09 $90 calls for only $7.25. Also, the Cal09 $100 calls can be owned for Zero Cost by selling the $65 puts in the same tenor. This strategy puts no premium at risk at or above $65 and provides unlimited upside protection above $100.
Singapore, 09:30
Wednesday, October 15, 2008
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