We are experiencing some beautiful summer weather in the Midwest right now. It is hard to believe that we are just a few months removed from what seemed like a never ending Polar Vortex. After passing the unofficial mid-point of the summer (July 4th) in the United States, I think about the all of the things we like to do in this short break before returning to Ice Age conditions. Baseball games, visits to a beach, lake, or National Park all share a similar trait when planning….what will it cost to get there.
People in the United States tend to be uber-sensitive to the price of crude oil, particularly in the summer or “driving season” as it is called by many. Many of us have a better chance of telling you what a barrel of oil costs over the current price of a gallon of milk. Since the end product is something that affects the day to day lives of millions of people, we tend to pay attention.
What grabbed my attention this week is the fact that Libya is on its way back to regular oil production after nearly a year of protests and strikes. It will take some time to be up and running again, but it is on the horizon. That news combined with data from the EIA (Energy Information Administration) showing weaker demand for gasoline has me feeling a bit bearish.
Trade Idea
I like buying the September crude 100-99 put spread at 30 points ($300.00) or better. Risk is limited to the cost of entry plus fees and commissions. Full value of the spread in the money at expiration (8/15/14) would be $1000.00. With just over a month to be in the trade I am setting a target exit at 90 points. Any further sell offs and crude should help us see a rise in premium, but time may be a bigger factor.
Grains Webinar
For those interested Walsh Trading is holding our weekly grain webinar today Thursday July 10th at 3 pm central time hosted by our Senior Grain analyst Tim Hannagan. Tim has been ranked #1 by Reuters and Bloomberg in 2011 and 2012 for his most accurate end of year price predictions for soybeans and corn. Registration is free and if you cannot attend live, a recording will be sent to your email upon signup.
RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING. THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT. WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.
