Latest Oil Volatility Presents New Opportunities for Writing Calls AND Puts

Good afternoon, this is James Cordier of OptionSellers.com with a market update for July 2nd. Well, with the first half of 2018 now in the books we start looking forward to the 3rd and 4th quarter of what has been a very loud economic market. Talks of tariffs in China and interest rates, inflation finally beginning; however, many commodity prices basically in a sideways trading fashion. Who in the world would think that the gold market would make a very strong move earlier this year with North Korea and the United States trying to draw battle lines. Interest rates negative in Europe and, of course, what’s always going on in China and now tariffs. We took a speculative move thinking that commodities, especially precious metals, would probably start languishing and going into a sideways fashion. So far this year, that’s exactly what has happened. Silver has traded in approximately a $1 trading range, gold has traded in approximately $80-$85 trading range for the first 6 months of the year. To watch some of the business shows, you would think that those had made large moves, but actually that’s just a lot of noise and a lot of headlines, which, of course, plays into our hands. A lot of discussion about China, interest rates, and inflation cause a lot of investors to buy options and, if we’re following along correctly, quite often the fundamentals don’t justify a big move, and then you sell calls much above the market and puts much below the market, and certainly that has worked out quite well so far in 2018. The new market that is now possibly heading into a consolidated type would be crude oil. The crude oil market has had dramatic moves over the last 24 months. Right now, we feel that that could be turning into a sideways market, as well. Both Russia and Saudi Arabia recently have discussed and arranged to increase production somewhat going forward. Clearly oil, which has increased now some $10-$15 a barrel over the last 6 months, is probably going to start pinching some of the economies around the world. If you were to look at Germany, for instance, they have some of the most negative business ideas right now going forward. We still have negative rates in Europe and, of course, China this past week entered what’s called the bear market where their stock market is down over 20% from its high. High energy prices during times of weaker economies around the world is probably not going to sit very well. Russia, Saudi Arabia, some of the largest oil producers, they know that and they don’t need to be greedy right now. They have produced oil for $35-$40 a barrel and trying to push it above $80 and turn some economies into recessions. That certainly is not their idea. We think that oil is probably going to start settling into a $10 trading range, Brent probably in the 70’s, and WTI in the 60’s. We think that putting a $50 strangle around crude oil right now is an excellent idea, similar to what we did in the precious metals earlier this year. We think both of those positions are going to continue to bear fruit in the last half of 2018. We will just have to wait and see. Anyone wanting more information from OptionSellers.com can visit our website. If you’re not already a client of ours and wish to become one, you can contact Rosemary at our headquarters in Tampa, Florida about possibly becoming one. As always, it’s a pleasure chatting with you and looking forward to doing so again in 2 weeks. Thank you.