Over the weekend it was widely reported Iran would steeply ramp up production now that US sanctions on the export of crude oil have been lifted.
Some analysts are calling for crude to fall as low as $18 as a result of Iranian export. Over the weekend Reuters quoted sources as saying South American (physical) cargoes are below $13 barrel.
No doubt, $10 crude could spark a global recession - but it probably won’t. Russia would collapse entirely, but more troubling are the ripple effects on South American debt and the balance of power the Middle East.
The US has in talks with Iran throughout 2015, and it’s likely word of Iran’s future as an oil exporter spread in some circles.
Traders must ask themselves, to what extent has the move we’ve seen been the market pricing in lifted Iranian sanctions?
The possibility of more downside in crude will keep Russian markets rattled without regard to any relief from China. The Market Vector Russian ETF Trust (RSX, 12.39) fell over 7 percent in Friday’s session, putting shares down about 13.5 percent year to date.
Given the heightened volatility, one could look to sell out-of-the-money weekly call spreads at the open. This allows you to capitalize on inflated volatility premium, with the expectation of bearish to neutral movement in the shortened week.