TRADING COMMODITY FUTURES AND OPTIONS INVOLVES SUBSTANTIAL RISK OF LOSS AND MAY NOT BE SUITABLE FOR ALL INVESTORS. YOU SHOULD CAREFULLY CONSIDER WHETHER TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES, KNOWLEDGE AND FINANCIAL RESOURCES.
Options play: How low will fundamentals really take crude prices?
Finally, the crude oil market seems to be trading on real fundamentals or supply and demand.
Fundamentally, to support the recent plunge in crude WTI prices are righteous. Everything I continue to read talks about more production and supply. Currently we are sitting on all-time record supplies here in the U.S. and the Energy Information Agency (EIA) report that hits the wire service every Wednesday morning at 9:30 a.m. Chicago time has shown a build in inventories for the tenth straight week this past .Wednesday
There are no producers in the world including the great Fracker’s here in the U.S. nor OPEC who are even considering cutting back production. Everyone wants their market share of the $40- $45/barrel oil market. Now that also includes Russia, Canada, Texas, and soon Iran. A deal I hear is in the making for the nuclear weapon’s sanctions to be lifted in Iran. That will be roughly another 2 million barrels per day to the all-time record high glut.
As I tell me clients and prospects if crude oil was really trading on the true fundamentals of the, meaning the true supply and demand, I believe the price would be at around $25/barrel. However, I also explain that I am not foolish enough to think the big boys, big traders, and big money will allow for it. My outlook for crude oil prices for the June or July futures in the coming weeks could go as low as $30-$35/barrel.
MOVING AVERAGE FORMULAS AND STRATEGY GUIDE:
Technically, on the chart below I have placed my favorite technical indicators. They are the 9 day Simple Moving Average (SMA, red line), the 20 day Simple Moving Average (SMA, green line), and the 50 day Simple Moving Average (SMA, blue line). I have also added the Bollinger Bands (BB’s, yellow lines) and Candlesticks (red and green bars), each bar represents one day of trading on the daily chart, one week of trading on the weekly chart, and one month of trading on the monthly chart.
On the daily chart below the June crude market is in what I refer to as a “PRINCIPAL TREND” down. This is a term I have coined that determines the strongest form of a trend that a market can be in according to my favorite technicals, whether up or down. In this case it’s down. In order for this “PRINCIPAL TREND” down to take place first I need the 9 day SMA (red line) to point down on a fairly sharp angle. Next I need the 9 day SMA to cross down and under the 20 day SMA (green line). Then I need the 20 day SMA to also point down on a fairly sharp angle. As the 9 day SMA has crossed down and under the 20 day SMA and both indicators are pointing lower together on fairly sharp angles and the price of the crude is using the 9 day SMA as the first area of resistance and is trading under the 9 day then the “PRINCIPAL TREND” is in full effect.
I have this “PRINCIPAL TREND” down not only on the daily chart, but also the weekly and the monthly as well. See all charts below.
I figured this out by placing my favorite indicators on the charts and studying them which I found at: http://www.markethead.com/2.0/free_trial.asp?ap=mmckinne , which is a web application that we have developed for our clients called MARKETHEAD where I get about 85% of all my research from. That means I get both technical and fundamental research from this web app and I am a veteran series 3 Broker of 15 years. So if I’m using it then maybe my readers should check it out. Yes?
Fifty Most Common Reasons Why Most Futures Traders Lose Money: http://www.zaner.com/offers/?page=7&ap=mmckinne
Daily June crude oil chart
Weekly crude chart
Monthly crude chart
Since I see crude prices moving lower from here a play could be to buy put options or bear put spreads with a call for a hedge in a 3 to 1 ratio, that could be 6 and 2, 9 and 3, or 60 and 20 as long as it’s a 3 to 1 ratio. The hedge calls or “insurance” calls are just in case the trend changes dramatically to the upside. When we buy options with th 3 to 1 strategy the risk is limited and predetermined.
Another play could be to sell deep out of the money calls collecting premium. Remember selling naked options involves unlimited risk and should only be considered if you have a well-funded account.
For exact details on other types of risk, months, expiration dates, strike prices, and number of positions feel free to contact me at 312-277-0115 or firstname.lastname@example.org. In addition, I am by no means “married” to the silver market. I like to make trade recommendations to my clients in the direction of the existing trend whether the market be the precious metals, currencies, financials, softs, grains and more.
25 Option Strategies: http://www.zaner.com/offers/?page=11&ap=mmckinne
FREE QUOTE- “Fortune favors the bold.” -Guiness
FUTURES, OPTIONS AND FOREX TRADING IS SPECULATIVE IN NATURE AND INVOLVES SUBSTANTIAL RISK OF LOSS. THESE RECOMMENDATIONS ARE A SOLICITATION FOR ENTERING INTO DERIVATIVES TRANSACTIONS. ALL KNOWN NEWS AND EVENTS HAVE ALREADY BEEN FACTORED INTO THE PRICE OF THE UNDERLYING DERIVATIVES DISCUSSED. FROM TIME TO TIME PERSONS AFFILIATED WITH ZANER, OR ITS ASSOCIATED COMPANIES, MAY HAVE POSITIONS IN RECOMMENDED AND OTHER DERIVATIVES.
FOR CUSTOMERS TRADING OPTIONS, THESE FUTURES CHARTS ARE PRESENTED FOR INFORMATIONAL PURPOSES ONLY. THEY ARE INTENDED TO SHOW HOW INVESTING IN OPTIONS CAN DEPEND ON THE UNDERDLYING FUTURES PRICES; SPECIFICALLY, WHETHER OR NOT AN OPTION PURCHASER IS BUYING AN IN-THE-MONEY, AT-THE-MONEY, OR OUT-OF-THE MONEY OPTION. FURTHERMORE, THE PURCHASER WILL BE ABLE TO DETERMINE WHETHER OR NOT TO EXERCISE HIS RIGHT ON AN OPTION DEPENDING ON HOW THE OPTION’S STICKE PRICE COMPARES TO THE UNDERLYING FUTURE’S PRICE. THE FUTURES CHARTS ARE NOT INTENDED TO IMPLY THAT OPTION PRICES MOVE IN TANDEM WITH FUTURES PRICES. IN FACT OPTIONS PRICES MAY ONLY MOVE A LITTLE.
THE LIMITED RISK CHARACTERISTIC OF OPTIONS REFERS TO LONG OPTIONS ONLY AND REFERS TO THE AMOUNT OF THE LOSS, WHICH IS DEFINED AS THE PREMIUM PAID ON THE OPTION(S) PLUS COMMISSIONS.