Citigroup led the way yesterday as the beleaguered financial institution found itself backed by the US government- pulling both equities and commodities higher while the dollar lost strength on funding questions. January WTI pushed back towards $55 for its second consecutive rally as hedge funds shifted from a multi-year short position back to one of being long.
While the extend of the current rally may be debatable, consumer hedgers who have been taking advantage of cheap upside protection in the form of the February WTI $80 calls have enjoyed recent profits. While the $80 calls are now trading around $1,600 per 1000 barrels, the $70 call can be owned for even less premium by selling the Feb $90 call. This vertical call spread is currently offered at only $1,250 per 1000 barrels with a maximum payout of $18,750 should the rally in crude oil push the market back above $90.
Singapore, 07:30
Monday, November 24, 2008
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