WTI crude oil fell below $47 in volatile trading yesterday, marking a drop of more than $100 in less than five months. Short-term producer hedgers have benefited from cheap put purchases over this period, as rising inventories and refining capacity combine with relentless consumer demand declines and a global deleveraging of risk. Despite the steep drop of recent months, many traders see no reason for a near-term reversal of the trend.
Many hedgers have been taking advantage of short-term downside bargains combined with a longer-term bullish perspective. Using WTI Asian options, the Q109 $30 put strip can be owned for only about $1,000 of total risk per month per 1000 barrels. This position can be combined with the purchase of the 2H09 $90 call strip for about $1,500 of total risk per month per 1000 barrels. This "calendar strangle strip" position effectively captures downside risk in the near-term while providing potential upside consumer protection for the remainder of 2009.
Singapore, 09:00
Tuesday, December 2, 2008
Subscribe to:
Posts (Atom)
Posts
