1) Looking at the chart above investors will notice that Unites States Oil Fund has not been at the 40 dollar level since May 2011.
2) If the tensions temporarily subside with Iran investors could expect a pullback in the price of oil.
3) The United States will most likely work diplomatically to resolve conflicts that arise out of Iran that pose a threat to supply of oil.
In the long term I’m bullish on oil, but looking at the current trend of every time Iran “rattles the cage” this sends oil prices higher and there has been a small pullback in the price of oil when the tensions slowly subside. On January 3 the United States Oil Fund is up over 3.5% on the Iran tensions and with this big jump in the fund I’m looking to take a speculative put position. The March 40 strike puts are down over 20% on January 3. If you believe the tensions are temporary with Iran and in the short term the United States Oil Fund will not be going to 40 in the short term, then taking advantage of the volatility getting sucked out of the puts might make money for you.
Im continuing to watch the price of oil and will be watching the February or March 40 puts. If tensions subside in Iran I would be a short term buyer of puts for a quick trade, as oil could see a possible pullback.