Commodity Research Group (CRG) 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 hedging strategies.
In this podcast, oil market experts Andrew Lebow and Jim Colburn discuss key fundamental forces driving oil prices in both the futures and options markets.
About Your Hosts
Andrew Lebow has been involved in the energy derivative area since 1980. He began his career with Shearson Lehman Brothers where he worked in the initial formulation and marketing of the NYMEX WTI crude contract in 1983 as well as the NYMEX gasoline contract in 1985.
Mr. Lebow has appeared before the State Government of Alaska as well as the State Department of Defense to discuss hedging techniques. Mr. Lebow is also well known as a market analyst and is quoted frequently in the financial press. He has appeared on television on CNBC, NBC, CNN, CBS, and PBS. Mr. Lebow holds a BA from Lafayette College and an MBA from the Kellogg School of Management at Northwestern University
Jim Colburn is a futures and options professional with 30 years of wide ranging experience in commodity markets. For much of his career, at Man Financial (1989-2011) and Jefferies LLC (2012-2013), Mr. Colburn worked with major integrated oil companies, hedge funds, pension funds and other entities to develop market hedging and trading strategies.
He has conducted trading, hedging and risk management workshops in energy markets worldwide.
Mr. Colburn is a published author on options trading, hedging, market making and risk management. In 1986, while at the New York Mercantile Exchange, Mr. Colburn helped develop new markets in energy option contracts by educating the oil industry, banks, floor traders and brokers, worldwide.
This is Jim Coburn of Commodity Research Group. I’m here with Andy Lebow also of Commodity Research Group, and we’re here to talk about energy markets.
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Today is May 12th, good morning Andy.
Good morning, Jim Colburn.
I think we should start right from the get go. Let’s talk about Russia. The number that the consensus number seems to be that when it’s all said and done three million barrels of oil will be taken off the market, can you give us an update on where you are on Russian oil exports and products?
Yeah, it’s, uh, three yeah, 3 million barrels a day. The IEA today, uh, this came out this morning, came out with their own change really in, in what they thought on, uh, Russian production. Uh, originally they, they had thought that by the end of April, it would be down one and a half million barrels a day. And now they’re saying, uh, it’s probably closer to, uh, a million barrels a day. Uh, they think that will increase to 2 million barrels a day as we get through the second quarter. And sometime later in the second quarter or into the third quarter, depending on if there’s an EU embargo or not, uh, Russian production will be down by, uh, 3 million barrels a day. So I, I think that 3 million barrels a day number is still good, but it’s gonna, it looks like it’s gonna take, uh, some time. And, um, the EIA had them down by 2 million barrels a day later, the, you know, second half of this year, uh, and OPEC, uh, whose report came out also this morning has Russian production down just a million barrels a day.
But, uh, of course let’s remember that, uh, Russia is part of the, uh, OPEC plus, you know, part of the OPEC plus cartel. So some of those numbers, uh, may not be a hundred percent accurate. Let’s put it that let’s put that way, Jim, uh, cuz I think a million barrels a day is, is uh, too low actually for the, for the rest of the year because you know, the, the, uh, EU is, it looks like they’re moving towards some kind of, uh, some kind of embargo, you know, that there’s still some negotiating, uh, is negotiating taking place. But, um, you know, I think our base case actually has a, uh, has a European embargo sometime later in the second quarter. And um, you know, I think the I is the same, you know, is looking at the same, the same things.
Well, there’s also, uh, some of the trading companies, um, aren’t willing to move Russian barrels as well. So it’s not just coming from the governments, it’s coming from the private sector as well,
Right. There’s there’s, uh, self sanctioning and, and the, uh, governments. It’s interesting that, uh, the IEA actually said that, uh, Russia crude that exports oil exports increased in, uh, increased significant increased in April, uh, as some of these contracts come to an end and Russia wants to get all they can out of the country to get as to get as much revenue as, uh, as possible as, uh, you know, they too can, you know, they, they too could read the, the, the tea leaves on what’s happening with the, uh, EU. So they, they actually had, uh, high exports in, uh, April, but, uh, beginning in, uh, may those are gonna be cut, uh, pretty dramatically were in’re almost in mid may and, uh, into June, we’ll be, we’ll be cut further. So I, I, I think the, the IA numbers are, are good. And as I said, that’s, that’s pretty much what we’ve been, uh, what we’ve been working, working with
And I, and that’s, what’s in the market as well.
Yeah. I think that’s what what’s in the market as well. Yeah. I mean, probably anywhere between the two and 3 million barrel a day more, but I think, I think most, uh, analysts and traders are probably closer to, uh, 3 million barrels a day.
And let’s just, um, take these one by one. Uh, let’s talk, let’s move over to China. What’s what, what is your update on, uh, the demand for oil and products from China given there? Well, China
Pet China, uh, petroleum demand at the beginning of the year was, uh, you know, we had them up like 0.6, which I think was close to the consensus, some higher, some lower, you know, growth and demand owing to the lockdowns and their owing to the lockdowns, as well as, um, the slowing of, uh, manufacturing, um, distribution and, uh, exports. You know, we we’ve pretty much cut that to, um, unchanged to up 0.2. So, you know, loss of at least 0.4 million barrels a day on, on, uh, growth for, uh, this next year. Now they are there, there is a stimulus package coming, maybe that will help, but, uh, you know, Jim, it wouldn’t surprise me to see China be unchanged, maybe even lower than, uh, you know, than last year’s demand.
I mean, the uncertainty is when do they come out of lockout.
And how hard, you know, how hard they can come out of, uh, lockdown on, on the demand
Lockdown. Yep. Yeah. It’s just, uh, we, are you more confident with what’s gonna happen with Russian oil than, than you are with China demand or are they both lots of,
I think they’re both. I think they’re both, uh, uh, covered with the uncertainty. You know, I think they’re both, uh, you know, the, the numbers are, are moving targets. I’m pretty confident on the, you know, China may, you know, maybe it’ll come up a couple of hundred thousand barrels a day, you know, that, you know, your Delta isn’t as great there. I don’t think it’s gonna end up being up, you know, demand for this whole year being up a million barrels a day. Anything like that, the Russian number of course, is, uh, you know, there’s a geopolitical factor with, with what happens with the, uh, you know, on the, on the EU so that that number can, can really swing. And also what happens to, uh, Asian buyers. Obviously China is not, is not their import numbers are way down, so they’re, they’re not taking, you know, that, that extra Russian that, uh, well, they’re taking some of course, but not, not anywhere near, uh, probably what the Russians had hoped.
And I think the EIA says some, they, they say we’re in a heightened period of uncertainty, which, um, I think they say every, every month since, uh, beginning of COVID saying That’s tough, tough being an analyst these days.
It, it is. I, I think these, uh, you know, these as we’ve been, we’ve been saying since the beginning of COVID, you know, these balances are kind of hard to, you know, get get right. Um, or even, or even close to it, you know, I, I think we’ve been doing our best and we’ve been updating them, you know, more than, you know, more than one, more than a few times a quarter, you know? Right. Usually I would update them monthly or, you know, if there were big changes, but now it’s just about every other day really <laugh>
I know it’s unbelievable. Um,
So we, we, we should probably should talk about, uh, product demand and, and prices, the cracks, the prices themselves are going wild. The cracks, I guess, are at record levels. You wanna take gasoline first?
Well, uh, yeah. Uh, gasoline, if you, if you look at the last EIA weekly report, the gasoline has now dipped below inventories have now dipped below the, uh, five year, uh, pre pandemic, the 20, 15 to 2019 levels. And, uh, you look at, what’s been going on in the front of the curve, you know, we’re, we’re at a big, uh, backwardation now. So you know, that that’s indicative of a, of a, of a tight supply and certainly stocks in, in the, on east coast, uh, have continued to decline over the last few weeks. Um, despite the fact that, uh, pump prices a record demand for gasoline is, um, actually it it’s okay. I guess, well, it’s not back, right. I mean, the demand for gasoline is the four week average is 8.8 million barrels a day. If you look at that 2015 to 2019 number, Jim mm-hmm, <affirmative>, that’s 9.3 million barrels a day. So the, you know, because of the pandemic or one of the reasons we’ve lost half a million barrels a day of, of, uh, gasoline demand. Now you had some interesting numbers on the, uh, gasoline Mo demand momentum, which seems to be, seems to be slowing here.
Yeah. I, I looked at the, uh, same, the weekly numbers. This, this came out yesterday and I looked at, uh, all the demand components and it, and it looks, it looks like a momentum is slowing down. And I, you know, you know, price rations use is, is what the saying is. And if you look at gasoline, the, the four week average is eight, eight, as you said, that’s down 1.4% from last year, but the year to date number. Uh, so that’s, that’s actually up 3.1% from last year. So clearly a, a loss of, uh, momentum. And again, that’s not, that’s not ki picking up any seasonality that’s comparing year on year. And, um, we, we have the same thing going on in a lot of, a lot of the categories from that, uh, weekly report distillate up 2.1 year to date, but four week average down 5.5%. And this is year on year. The other, the other one I would mention is, uh, jet fuel jet fuel’s up year to date up 28% and four week average up 27%. So not that that’s maintaining its, uh, its strength from, from last year, but, but gasoline and dist distillate looks like a loss of, uh, of momentum.
And, and that’s not surprising giving that, given that we have record pump prices on both, I mean, diesel prices are through the, through the roof.
So, um, if a refiner came to you and said, we want hedge second half cracks, what would you say to them?
I would say, uh, yeah, I would look at, at, uh, hedging second half cracks for, for sure. Now the, the cracks have come off. At least the front just came off in the last two days. They were closer. They were like mid sixties, which is an incredible number for, uh, diesel cracks in the, in the front of the curve. The back is still pretty healthy. So a refiner came to me and, and said, you know, do, would you be looking at, at hedging, these cracks? I would say absolutely. But, uh, given the fact that I think there’s still some upside here on, uh, on diesel, you know, I wouldn’t be, I wouldn’t be hedging, uh, their entire run. In fact, I’d probably be looking at hedging, maybe, you know, I think 10 to 20% is the, is the right number. I don’t know if you agree with that.
Yeah. I was coming in around 10%. I mean, we, we’re kind of, these cracks have just exploded and, and um, you know, we, we, we learned from the nickel market that, you know, when you’re hedging, you, you, you, uh, inject some, uh, cash flow issues. So you, if you sell far out along the curve and the hedge goes against you, you have to come up with margin money and you don’t get the benefit of those higher prices because you’re, you’re not, you know, you’re selling the amount of stuff you you’re hedging more barrels than, than product that you’re selling every day. So you’re, so you get this cash flow problem. Uh, and we saw that in extreme, in nickel, but it happens in other markets as well. So I, yeah, so I was saying little with the, with the ability, I mean, it, as things going ballistic already continue to go, um, I would say 10% and then kind of, uh, ratcheted in there, a little layered in there, uh, be, but be very conservative hedging and the other there. The other part is like you said, I, it might not be over, but it doesn’t just because it doesn’t keep making new highs doesn’t mean it’s gonna collapse either. So I don’t know, you know, you probably, probably these cracks will probably be good for a while. I mean,
Yeah. I thi I think so. I mean, you look at pad one diesel stocks there at the lowest since 1990. And, you know, may, maybe before that, I, I don’t have the data for before 1990, but, and it, it, you know, the question is where is the resupply coming from? You know, a lot of the Gulf coast, the Gulf coast diesel is moving to Europe and south America in PADD one, we have lost the significant amount of refinery capacity. So we’re gonna, it’s gonna have to come from Gulf coast. Refiners are gonna gotta ramp it up some more, um, any spare capacity of the east coast is gonna be ramped up. And Europe is, you know, they they’ve certainly got their, their own issues. And, you know, imports of, uh, diesel have been of dist distillates are, are awfully low right now. You know, they, they may pick up some, I mean, the a is open, but it’s a question of getting, um, you know, getting boats and insurance, et cetera, et cetera.
And, you know, the Russian exports are, uh, for diesel is a million barrels a day. So that that’s a big loss of, for the global market. Uh, what has to happen is product has to move from, uh, east to west from, uh, we’ve gotta see more exports from Asia into Europe, help to fill Europe and then maybe get the overflow here, uh, which, you know, that’s gonna take time. So there’s certainly a window open for these cracks to remain pretty strong, but you don’t wanna miss it either. Right. Right. Yeah. But you don’t wanna miss it either. Well,
That’s right. You’re, you’re locking in incredible numbers right now by hedging, right?
Yeah. Right. It’s yeah. You gotta get some off.
Yep. And then you, you know, you never want to hedge too much because you know what, if your refinery goes down <laugh> and you, then you, uh, and, and the, you know, the markets, you you’re losing money on your hedges and you can’t make it up with products. So, um, that’s a problem too. You’d love to be buying puts, but there’s no viable put market in cracks. We, we traded it, uh, back in the day, like I remember 2001, people had, some were trading some crack options, but it, it tended to be, uh, one flow, like, uh, put buyers and call sellers and the market makers. Um, I don’t think felt comfortable having, you know, not having two way, two way paper flow buyers and sellers coming in. Um, so, you know, there were less and less market makers and got less and less interest.
So hasn’t, hasn’t been a viable market. I’m not, I wonder if you could buy a put on sort of a, a, uh, bunch of refiners, you know, you buy puts on their stocks, but that, you know, you couldn’t buy, if you’re a refiner, you can’t buy, doesn’t make sense to buy puts on your own stock. But, you know, I’m just thinking about how you would hedge this by buying puts, which would be the best way. I think, cuz then you, if the market roars up, you don’t you’re okay. You just, you locked in a worst case price and you know yeah, yeah. You know, so, but,
But the worst case price is pretty awesome.
It’s pretty awesome. That’s right. That’s, right’s like a,
It’s like oil producers market goes down, at least you got, you got some of that, you know, of course there’s also the, the question of what your shareholders want you to do, you know? Yes. They’re not, they’re comfortable with you with you, um, taking some, uh, you know, taking some risk off the table on your refinery run, you know, and, and let’s move over to gasoline. We’re heading into this, we’re heading into the season as, as I mentioned, uh, we’re now below the, um, you know, below the five year average by 10 million barrels and given the, the backwardation in gasoline, you know, there’s in indicative that things are tightening up. So do you hedge some of your gasoline run as well? The, these numbers are good for gasoline all down the, you know, a $50 crack in the front for gasoline, you know, refiners used to be ecstatic, $20 cracks, you know, $20 gasoline cracks were were awesome. So my, my answer would be, yeah, I’d probably take a look at, you know, hedging, some of that too. Maybe not as much as the diesel, but yeah.
The three, two ones
<laugh>, uh, Jim
They’re 50 bucks.
I know. It’s unbelievable. Crazy. Yep. We, we had a, uh, we had a zoom cast with some of our refiner friends and, and we asked them, um, you know, if, what part of the oil business would you like to be in right now? And they all said, we’d like to be refiners,
Yeah. Right. So, um,
Which always the answer, right.
<laugh> what’s that,
That’s not always the answer. It’s like, oh, we don’t even want to be in this business, but if we had to, yeah, I exactly,
Yeah. You’re, you’re, you’re losing, you’re losing money per barrel, but you’re gonna make it up on volume, that kind of thing. Right, right. Um, anyway, uh, going forward, if you are a refiner, are you making more distillate during the gas season than you normally do?
Yeah, absolutely. I mean, the, the crack told you to make more, uh, to, to make more diesel. And that’s another bullish factor for, uh, for gasoline. You know, you’d expect that the yields in this country is, is going to be, you know, switch to, uh, diesel and, uh, at the expense of, at the expense of gasoline. So if we do have any kind of booming, uh, gas demand this summer, you know, it could be an issue. Now I’m looking at the EIAs view for, uh, gasoline demand this summer, let’s say Q2 and Q3 it’s, they’re not looking for all that much growth. They, they last year, Q2 and Q3 were about 9.1 million barrels a day. And, uh, this year they’re looking at 9.12. So almost no growth from, uh, last year. Uh, and that could be a, that could be a price effect. Maybe it’s an income effect, uh, an inflation effect. I, I’m not, I’m not sure, but that, uh, you know, that roaring gasoline season may, may not come completely to, to pass this year.
Yeah. It’s interesting. You mentioning inflation, the, uh, economists are getting, uh, whacked a little bit for looking at the core rates <laugh> as people were saying, wait a second, you’re taking food and energy out of the CPI. <laugh> yeah. Right. That’s that’s our big, that’s our big expense.
Right? Should, should we take that out of our, our pockets, right. Should we not eat or drive?
Yeah, that’s I don’t understand that when they talk about the real price of oil and they use a CPI to sort of, you know, get, get in, you know, 19 $60 or 70, $80, whatever they talk about, it’s a big component of oil in that CPI. So you’re kind of dividing it by itself. I don’t, it must be a better way to look at that, but anyway, still a lot to talk about Andy. So, so those are kind of some major issues, but let’s go back to talk about your, uh, uh, stock levels. I think, I think, um, a lot of people had builds in global stock levels for the second half of the year. And, and now it, you know, you get, uh, more of a balanced look to the market and you, you had some, you had a surplus, but, um, why don’t you update us on what, what you’re thinking is with global stock levels.
Yeah. I had a, um, you know, I, I had a surplus, uh, which I’ve lowered just a little bit, but, uh, for 2022, I see a, a global stock build of, of only of 330,000 barrels a day, Jim, which is really balanced. You know, the, the question, the question of course, is will the, the, the loss of 3 million barrels a day be covered. And the answer is, yes, it will be OPEC. Production is going to be on the rise, non OPEC production, X Russia is going to be on the rise. And, um, we’re getting S SP we’re getting SPR barrels, plus there’s the loss of demand. So, you know, we have demand down, uh, demand from the beginning of the year. We’ve, we’ve marked it down by 1.3 million barrels a day, uh, which is exactly what the IEA did. So the mine was done before the IEA <laugh>.
Um, and I think, you know, you, you look at these balances and yeah, we’re tightly balanced, uh, which is, uh, leave, you know, leaves you to error on, on either either side, if you look at the EIA numbers, uh, which came out as short term energy outlook, they too have a build of 300,000, just look at that now, so that, you know, again, very tightly balanced and OPEC is basically unchanged for, for the year. Uh, second quarter looks like it’s gonna, to me, I’ve gotta build of, uh, 600,000 and the other guys are all around, you know, OPEC and the EIA, uh, are up around 700,000. So it looks like second quarter. We should be seeing some, um, modest stock builds here, which will certainly help rebuild inventories somewhat. We’re still way too low. Right. Um, but you know, you look at the, you look at these builds.
I think it, it’s hard. And, and we’ve been saying this, I know in our monthly reports and also, uh, you know, on these, on these podcasts, you know, to me, it, it’s hard to see the market really, unless something changes dramatically. You know, I, I just don’t see the market exploding on the upside. You know, we’ve been in a, a broad trading range over the last few weeks between, um, let’s say 1, 1 15 and 92, a big trading range. And then just in the last six days, we’ve been between one 11 and 92, but I kind of think that’s the, that’s the range for now. And I’d be, you know, I’d be more bearish, slightly more bearish than, uh, than bullish that’s, but, um,
Interesting you, uh, bring up trading ranges. The, um, they’ll introduce me to introduce, uh, little options chat, but, um, I think the, was it the EIA, uh, saying Brent range, $42 in March $17 in April. And we saw that in, in volatilities, in March on the, on the high price of the, was it March 8th or ninth, something like that? The high price was, uh, we, we got over a hundred percent, uh, implied Val in the front month. Second month was only up around, uh, 75%, I believe. And, and now we’ve been going between, uh, 50 and 60, uh, June, uh, expires on the 17th pretty soon that 53% just sold off, uh, yesterday and July is at 54.6. So, you know, they’re, they’re da they’re up from, you know, I still use a long term average around 33%. So they’re, you know, up from that, but way down from, from last month and kind of, you know, it’s saying there’s, there’s still a lot going on in this marketplace, but the actual price movements are, are less than what they were last month, much, much calmer the call volume.
We still see. So, so the, uh, the volumes also collapsed, uh, in April WTI options trade around 95,000 a day. And that was down 44%, uh, from March. So you, so we, we talked about that before, where, you know, for a year, people were, you know, gearing up for this rally and crude, and then they get, and, you know, they get this, uh, Russian invasion and it was a lot massive, uh, profit taking and liquidation. And we do see flurries of bullish activity, um, when prices dip, um, we’ll, we’ll see like a, a big call day, you know, and, uh, but, but overall, uh, even in April, the, the volume seemed to be, um, subdued and, uh, we’ve lost a lot of, uh, you know, players. I know probably temporarily, but because of, you know, as, as we’ve been talking so far, the uncertainty in the marketplace, it’s, we’ve, we’ve reached, uh, a level of uncertainty to reduce, reduce the trading, I guess, is what, what I’m trying to say here.
The, our famous D 2200 call still is, uh, number one as 51,000. But I, if I recall that that was up, that open interest was up to 75,000. So that’s, that’s been, um, you know, trading, it hasn’t been the top traded option, uh, but it has been, uh, uh, somebody’s been liquidating positions in there. And then the, um, in Brent, the biggest call open interest is the D one 50 call. It’s about 43,000. They also have a D 55 put, it was 40, around 42,000, but I think that’s, you know, a lot of the Mexican hedge is going into the Brent market. So that might be part of that. Um, I think it was from a long time ago, put on a long time ago. So, but other, other than that, the, the, the, um, again, the market, the option market subdued, and we’re just, uh, I guess I try to look at the Gulf war where the price, the volatility got over a hundred percent on a price move up, SIM SIM, you know, it was both wartime.
And what happened, what we started to see was the market would churn around, you know, move sideways, still have some big trading days, like, uh, price moves, but overall it wasn’t, wasn’t gaining any ground. And you’d see the, the, uh, people who had bought options to play the volatility as, as that option became front month or became, you know, just a, maybe a couple weeks to go, they’d start liquidating it and, and go out and buy something along the curve. So they wanted to stay long options, but they didn’t want to get hit with time to case. So you start to see implied Val in the front month collapse, like two or two weeks to go, uh, on the second month. And we’re, we haven’t seen that yet, but, uh, yesterday settlements, June settled under July 53% versus 54.6. So maybe, maybe if we keep churning this market, you know, going forward, we’ll see more of that kind of activity. So that, so basically Val staying around 50%, but as we get closer to expiration the, uh, front month collapses, maybe two, two and a half weeks out anyway. Uh, so what else we wanna talk about Andy? We covered a lot here.
Here’s a question. So we’re, you know, we’re talking about ranges and, uh, would you and file coming off now, would you sell those ranges? Would you, would you sell a, a call and a, you know, let’s say, uh, 1 20 90, I, I don’t even know what that would value that would be, but would, would you sell that type of trading range?
Well, I, my, my approach is always to look for markets that are low volatility moving to high volatility. I think that’s the way to go this one, unless, you know, it’s extreme. And, and I would say may, if, if you do that, just do it very lightly, you know, in terms of your portfolio trades, it’s, it’s probably gonna, it’s kind of probably gonna be okay, but you won’t. And then, you know, it’s not only a risk reward, but, you know, do you wanna sleep at night? That’s kind of thing. Do you wanna, you, you, you probably gonna focus on that more than what it’s worth. So, yeah, but if I probably,
I totally agree. I, I just wanted to lay you up with that one.
Yeah, no, I just it’s not listen. I, the way I learned options, I, I saw, um, I had, I was a broker for Merrill Lynch and I had these two speculative clients and we were very Bo this is back in the eighties, mid eighties. And, and, and, um, we were bullish the, the stock market, very bullish, and one guy buys futures. And the other guy buys, uh, like a handful of, out of the money calls. And the first move the market made was dipping, lower, stopped the guy’s futures guy out, and the, um, guy with the calls doesn’t budge and the market turns around and goes higher. And for like three days, I tried to get this guy back into his future’s position, but he wouldn’t budge because he didn’t wanna buy above where he sold it. It was this, this, uh, you know, uh, psychological barrier.
And meanwhile, these, the, these stock market went up like for the next couple of weeks. And this guy, the, the, the calls went deep in the money. And we started selling, we, we picked the top and we sold five futures against the, the market where, where it was. And in a couple days it came down and we bought them back and it went up again. And we, we did this like three or four times, and, and the guy was, you know, he, he was ecstatic. He said, I never made all the, this, my anyway, never made this money in his life, but it, it, it was my first sort of entree into options. And, and so it’s my bias. And I think it’s served me well is to be on the long side of buying of options, not the sell side,
But which I, yeah. Which I know, because you’ve been in all the presentations and, and all the teaching that you’ve done on, uh, options, that, that really has been a, a theme of yours that, uh, you know, buy buying options, uh, is, is in, in many ways, you know, better than, than selling options.
Yeah. It’s so, and, you know, in markets, it’s never a hundred percent, I mean, a lot of the oil companies, you know, they have assets, they can sell calls against, or, you know, but they also have, they have optionality in their, in their assets, in their daily business, the way they conduct business. So, um, they’re basically long options just by the nature of the business. And, and so, you know, to monetize them, sometimes you, you sell options or you, you do a Delta hedging, uh, technique that, uh, you, you trade your gamma basically against it. So it’s kinda like monetizing, uh, uh, a long option. And, and so, you know, I’m not, you know, I’m not, so I’m not dogmatic on it. I’m just saying it it’s, it’s my bias. I’d rather be a buyer of options than a seller.
Right, right, right, right.
Right. Especially in this world, holy cow.
It’s like, you always, you can’t, we can’t go to kids anymore and say, oh, when I was a kid, you guys don’t know anything it’s, uh, I, I used to, well, yep.
Yeah. I, I think a lot of, a lot of investors are, uh, you know, now being confronted with, uh, a lot of new investors are now being confronted with, uh, worlds that, uh, you know, they just had no idea about inflation being certainly one, one of them. I mean, we’re talking about a generation type, uh, inflationary move. And of course what’s gone on in the oil market in the last, since, you know, in the last, since the pandemic is, is, uh, historical. So
Yeah. And that, and that there’s evil in the world.
Yeah. I think there’s, there’s, there’s evil in the world. Yeah.
Um, so which we,
We, unfortunately, you know, as just following the oil market have, have learned too often, I’m afraid.
And, uh, Andy, any, we, we talk anything that we missed that you want, you wanna talk
About. I think we did a, I think we did a pretty good job covering, uh, you know, the, I’m sure that we’ve missed plenty, but yeah. You know, I think, I think we’ve covered a lot, a lot of ground here.
You don’t wanna talk about Mars spreads? No,
I wouldn’t mind talking about the Boston Celtics. I don’t think <laugh>
Okay with that. Andy let’s uh, let’s
Wrap this up. We get wrap up just,
Just the Celtics, just lost, uh, game five to the Milwaukee bucks. I’m a big Celtic fan, but, well, Andy’s a Nick fan. Can’t even bring that up. Right.
I have nothing to talk about. All I’m living for is Rudy gets to Celtics. So it’s sports like many Nick fans,
Sports hate. Yeah. Very good. Okay, Andy, we’ll talk to you next. I’ll talk to you sooner the next month, but our next podcast is schedule for next month. We try to do ’em once a month. Don’t always, uh, based on our, our schedules. We can’t always get to it, but, um, I’m sure by next month, there’ll be lots to talk about in the energy markets.
Yeah. Let me just conclude you can find us on LinkedIn. If you want to get a hold of me, I’m at firstname.lastname@example.org and we also have a website and we’re both available for consulting. Jim is one of the great option teachers ever. I mean, I’ve sat through many of your lectures, and I still learn something each lecture and he too is available for advice and consulting on options and option strategy.
All right, Andy, talk to you next month.