For the last several months, Crude Oil has been in a sideways price channel as supply and demand data has been keeping the market from making a sharp move up or down.
Looking at the December 2016 futures chart, we can see prices have been fluctuating between a support price of 39.70 and a resistance price of 53.62 since the beginning of April of this year.
With recent IEA data coming out that there is still an oversupply of oil worldwide, we aren’t expecting any major price moves up for the next several months. Based upon the above technical and fundamental information, I would recommend either a futures spread or futures option spread in Crude Oil to take advantage of the current market conditions.
Using futures options, I’d recommend a strangle spread to take advantage of the current sideways price channel. The minimum Call option strike price should be 60.00 and the maximum Put option strike price should be 32.00. Look at January or February 2017 futures options.
For those of you interested in using a Crude Oil futures spread, I would recommend buying an April 2016 futures contract and selling a January 2017 futures contract. Max hold time would be through the end of November 2016. My profit target would be $750 per spread and I would risk no more than $500 per spread.
As with all trade recommendations, there is no guarantee of profit. Be sure to have your profit and risk parameters set prior to entering into any futures or options trade and stick to them.
Insignia Futures & Options clients, please feel free to contact me to further discuss this trade opportunity.
If you are not currently an Insignia Futures & Options client, please consider opening your own futures trading account by clicking on the following button…
Principal Futures Broker
Series 3 & Series 30 Registered
Toll Free: 1-866-892-2030
Insignia Futures & Options, Inc.