It’s not very often that Brent/WTI spread options make the news… But traders (at least two) are taking a stand on the relationship by trading $0 strike calls in late 2018… Buyers expect WTI to trade above international or Brent, oil prices (below zero on the chart)… Sellers expect not…
Here is the chart from the WSJ: http://www.wsj.com/articles/gop-tax-plan-could-boost-prices-at-the-pump-1482411601
The trade is in response to a potential GOP tax bill which would influence relative values of domestic and international oil… Here is more from the WSJ and our own Andy Lebow:
“Most of the market chatter [last] week has been about that provision,” said Andy Lebow, senior partner at the consulting firm Commodity Research Group.”
The tax plan “would for the first time levy corporate taxes on imports to the U.S. while exempting exports from U.S. tax. It employs a concept commonly used in other countries’ value-added taxes.”
“Oil analysts and traders speculated the tax proposal could be behind the jump in options volume, although it is unclear who was behind the trade.”
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