Calendar spread options, WTI – Commodity Research Group

March 13, 2018 by Jim Colburn Leave a Comment

In early February, some deep out of the money put buying occurred in the April/May, May/June and June/July (also, the expired March/April) 0, zero, put option, probably by one trader… The buyer was expecting or hedging against the WTI curve slipping back into contango… Here is a picture of the most open interest in spread options from the CME:

And here is a recent chart (barchart.com) of the April/May spread:

If we slip deeper into contango, I may have to revive my “Option Trade of the Year” award…

We discussed this trade in our March podcast…

Commodity Research Group (CRG), founded by veteran analyst Edward Meir, is an independent research consultancy specializing in base and precious metals, as well energy products. The Group provides research and general price analysis for these markets, along with advice to companies seeking to construct commodity hedging strategies.

Our associates bring decades of experience to the table, as they seek to help our clients understand the markets. CRG will distill the myriad of pricing variables mentioned above into coherent research that is to-the-point and tailored to a clients hedging or pricing needs. In addition, CRG is available for consulting assignments and speaking engagements. CRG does not manage money or trade for itself.

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