Trade idea
CL calendar spread
The current spread of $9 in crude oil is due to uncertainty in the front month, which is priced higher than the back month. While the spread may narrow, it is not guaranteed, and traders should be cautious about assuming mean reversion. The spread reflects market sentiment and physical deliverables, not arbitrage opportunities. Traders should consider the risk of further widening and the potential for the spread to remain wide.
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Strategycalendar spread
Assetcommodity
Time horizonShort-term
Entry / triggerWide spread due to uncertainty in front month
Target / exitPotential narrowing of the spread
Invalidation / stopSpread widening further
SpeakerScott
Risks- Spread widening further
- Market conditions changing
- Uncertainty in future delivery
Trade idea
CL Buy December CL future and sell current month CL future to play for a return to contango
The speaker suggests a calendar spread strategy involving CL futures to capitalize on a return to contango. This strategy is based on the idea that contango (where futures prices are higher than the spot price) can be exploited by buying a longer-dated future and selling a shorter-dated one. The speaker acknowledges that this is a common strategy but notes that it is challenging for retail traders due to capital requirements and the need for precise timing.
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StrategyBuy December CL future and sell current month CL future to play for a return to contango
Assetfutures
ExpirationDecember
Time horizonUncertain, depends on market conditions
Entry / triggerReturn to contango
Target / exitProfit from contango
Invalidation / stopMarket conditions that prevent contango
SpeakerTony
Risks- Capital requirements
- Market volatility
- Timing risk
Trade idea
CL call spread
take advantage of market condition
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Strategycall spread
Assetcommodity
Expirationcurrent
Time horizonshort-term
Entry / triggercrude oil is up 250
Target / exitcollect between one-third to 25% of the width of strikes
Invalidation / stopcall skew in crude oil
Speakerspeaker
Risks- market reversal
- volatility drop
Trade idea
CL pairs trade
The speaker suggests that while crude oil and gold may show divergence, they are not a classic pair with high correlation. Therefore, a pairs trade between CL and GC is not recommended as a reliable hedge. However, if a trader chooses to proceed, they should focus on micro-level trades and be aware of the low correlation and potential for divergence.
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Strategypairs trade
Assetcommodity
Time horizonshort-term
Entry / triggerCrude oil near recent highs
Target / exitGold near recent lows
Invalidation / stopHigh correlation between crude oil and gold is required for the trade to be effective
SpeakerScott
Risks- Low correlation between assets
- Market volatility
- Potential for divergence
Trade idea
CL short put
The speaker is bullish on CL (Crude Oil) and is short puts, indicating a belief that the price will not fall significantly. The strategy involves selling out-of-the-money puts to collect premium, with the expectation that the underlying asset will remain above the strike price. The speaker acknowledges that the market may not sharply rise but believes in the continued premium collection through short puts.
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Strategyshort put
Assetcommodity
Expirationnot specified
Time horizonnot specified
Entry / triggermarket on close
Target / exitnot specified
Invalidation / stopnot specified
SpeakerTom
Risks- If the price of CL falls below the strike price, the short put position could result in losses.
- Market volatility could lead to unexpected price movements, affecting the effectiveness of the strategy.
Trade idea
CL selling rallies
The speaker suggests selling rallies in the oil market, particularly using strangles on the CL contract. The idea is based on the belief that oil prices can move rapidly, and the speaker has previously sold premium on the CL contract, expecting the market to revert to a range. The strategy involves taking advantage of the volatility and the liquidity of the oil market, with a focus on short-term price movements.
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Strategyselling rallies
Assetfutures
Expirationnot specified
Time horizonshort-term
Entry / triggerwhen oil prices are rising rapidly
Target / exitnot specified
Invalidation / stopif oil prices continue to rise beyond the initial range
SpeakerBarry
Risks- Market can continue to rise, leading to losses
- Liquidity issues in the options market
- Volatility can lead to unexpected price swings
Trade idea
CL put selling
The speaker sold 64 puts on crude oil (CL) for $1.71, indicating a bearish outlook. The rationale is that crude oil prices had dropped back down, suggesting a potential for further declines. The trade idea is to profit from the put sale if the price continues to fall. The invalidation level is if crude oil prices rise significantly, which would reduce the value of the put options.
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Strategyput selling
Assetcommodity
Expirationcurrent
Time horizonShort-term
Entry / triggerCrude oil price drops
Target / exitProfit from the put sale
Invalidation / stopIf crude oil price rises significantly
SpeakerTom Sosnoff
Risks- If crude oil prices rise, the value of the put options will decrease, leading to potential losses.
- Market volatility could impact the effectiveness of the trade.
Trade idea
CL strangles
The speaker suggests that crude oil is a range-bound market with high implied volatility, making it suitable for short strangles or iron condors. By selling strangles at 70 and 150, traders can collect premium while profiting from the price range. The strategy relies on the market staying within the defined range, and the high implied volatility supports the potential for significant premium collection.
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Strategystrangles
Assetcommodity
Expirationcurrent
Time horizonshort-term
Entry / triggerprice within the range of 80 to 110
Target / exitprofit from the wide price range and high implied volatility
Invalidation / stopprice breaking out of the range or significant volatility drop
SpeakerTom
Risks- Price breaking out of the range
- Volatility drop
- Market liquidity issues
Q&A
What is the current spread for crude oil?
The current spread for crude oil is $9.
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Actionable takeawayThe spread is wide, indicating uncertainty in the front month.
Q&A
Is buying a December CL future and selling a current month CL future a good strategy for a return to contango?
The speaker acknowledges that this is a common strategy for playing for a return to contango, but notes that it is not the same as simply buying a December CL future and selling a current month CL future. The speaker explains that the two are different deliverables and that the strategy involves a calendar spread. The speaker also notes that this strategy is challenging for retail traders due to capital requirements and the need for precise timing.
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Actionable takeawayA calendar spread involving CL futures can be used to play for a return to contango, but it requires careful consideration of capital requirements and market conditions.
Q&A
Are you long crude oil or USO?
Tom is long Delta, not technically long CL. He is short puts and short calls, with calls further out of the money than puts.
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Actionable takeawayTom's position involves short puts and short calls with different strike prices.
Q&A
What is the current price of crude oil?
Crude oil is up 256 this morning.
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Actionable takeawayCrude oil has increased significantly this morning.
Q&A
What is the correlation between ZB and CL?
The speaker states that there is a strong negative correlation between ZB (U.S. 30-year Treasury bond) and CL (Crude Oil). This correlation is noted as a significant factor in the bond market's movement, with the speaker suggesting that the bond market is acting as a 'bond vigilante' pushing yields down in anticipation of policy changes.
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Actionable takeawayThe strong negative correlation between ZB and CL indicates that movements in crude oil prices can influence bond yields, suggesting that investors should monitor both assets for potential market signals.
Q&A
What is the current state of the market?
The speaker discusses the current market conditions, noting that Bitcoin is down 460, oil is down 23, S&P 500 is up 27, gold is up 49, NASDAQ is up 185, silver is up 377, VIX futures are down 23, and cash is down 24. The speaker also mentions Micron's stock is up 21 in change today.
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Actionable takeawayThe market is showing mixed performance with some assets rising and others falling, indicating a volatile environment.
Q&A
What is the current market performance of S&P, NASDAQ, gold, oil, silver, and Bitcoin?
The S&P is up 60, NASDAQ is up 593, gold is down 22, oil is down $30, silver is down a dollar, and Bitcoin is up 35. This indicates a mixed performance across different asset classes.
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Actionable takeawayThe market is showing mixed performance with equities and Bitcoin rising while precious metals are falling.
Q&A
Are you bullish on CL?
The speaker is bullish on CL (Crude Oil) and is short puts, indicating a belief that the price will not fall significantly. The speaker acknowledges that the market may not sharply rise but believes in the continued premium collection through short puts.
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Actionable takeawayThe speaker's bullish stance on CL is based on a short put strategy, which involves selling out-of-the-money puts to collect premium, with the expectation that the underlying asset will remain above the strike price.
Q&A
How do you approach trading the oil market?
The speaker suggests trading the oil market using either the CL or MCL contracts, with a preference for CL due to its liquidity. They recommend avoiding ETFs and stocks that track oil, as they are less efficient. The speaker also mentions that they are a seller of rallies and a contrarian, suggesting that traders should consider the market's volatility and liquidity when making decisions.
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Actionable takeawayTraders should consider using the CL or MCL contracts for oil trading, focusing on short-term volatility and liquidity, while avoiding ETFs and stocks that track oil.
Q&A
What commodity would be the most consistent to trade for consistent premium and price range stability?
The speaker suggests that gold (GC) and crude oil are the most consistent commodities to trade due to their liquidity and stable price behavior. These commodities are preferred over others like silver or live cattle, which are more volatile and less liquid.
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Actionable takeawayGold and crude oil are recommended for consistent premium trading due to their stable price ranges and liquidity.
Q&A
What is the speaker's opinion on crude oil?
The speaker believes crude oil prices have dropped and sold puts on crude oil (CL) for $1.71, indicating a bearish outlook. The speaker is short some puts and added to the position as crude oil prices dropped.
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Actionable takeawayThe speaker is short crude oil puts, expecting further price declines.
Q&A
What is the recommended strategy for trading crude oil given its current market conditions?
The speaker recommends short strangles or iron condors in crude oil, given the high implied volatility and the market's range-bound nature. The strategy involves selling strangles at 70 and 150, capitalizing on the price range between 80 and 110.
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Actionable takeawayShort strangles or iron condors in crude oil, targeting the range between 80 and 110.