Options traders betting on $100 oil - WSJ

• Traders have been heavily buying call options tied to Brent and West Texas Intermediate crude oil prices reaching $100/bbl by the end of next year, a milestone not seen since 2014, WSJ reports.
• Owners of $100 options, the most widely owned WTI call contracts on the New York Mercantile Exchange, are making a leveraged bet that oil prices will continue moving higher after already surging more than 40% this year.
• The flurry of activity in $100 oil options is mindful of the speculative wagers that have occurred in other corners of financial markets, including options on unprofitable companies such as GameStop and AMC.
• Buyers are betting on higher volatility more than they are actually expecting higher oil prices, Robert Yawger, director of energy futures at Mizuho Securities, tells WSJ.
• Yawger does not expect oil will even get close to $100/bbl, noting that the futures market pegs WTI prices at ~$61/bbl for December 2022, but he says owners of $100 calls will benefit anyway because expected volatility is low and likely to rise.
• ETFs: USO, UCO, BNO, SCO, USL, USOI, DBO, NRGU, OILK
• July WTI crude currently trades slightly below $70/bbl, but that's the highest level in nearly three years.

Comments

[kimbillro]

These call options buyers are delusional, ridiculous, and reckless. They must be a bunch of YOLOs (You Only Live Once)!

[AEGISBMD]

@kimbillro

People like to gamble...no more office pools and Vegas vacations, so they use the money for playing Options (alos think Lotto sales!).

[kimbillro]

@AEGISBMD , Between YOLO, TINA, and FOMO the markets are in a bubble. A note for some newbies out there: FOMO means Fear Of Missing Out...it has nothing to do with Fomo da Frog who foams at da mouth!

[AEGISBMD]

@kimbillro

Its not the fall that kills you....its that sudden stop at the end.

[Sirvasq]

Trade is profitable when oil hits 70.

[iv2006]

It will be $200 when oil majors cut production by 20-30%

[haowuliao]

@iv2006 running will become a trend, I should invest some sports shoe manufacturing and knee repair business

[BobW333]

@iv2006
Oil majors aren't cutting production, and OPEC is already, if slowly, turning the spigot back on.
I think the price will be demand-driven. If people continue driving giant road-hog RVs cross-country even after gas gets to $4, commercial transportation picks up, and industrial activity resumes, then perhaps it could go to $100.
And that would be good news indeed for some of my investments.

[iv2006]

@BobW333
Oil majors are cutting Capex, and production cuts will follow.

[Jon Brien]

Once the virus is fully beat it's all blue skies i e no shooting Wars, no threat of missiles including North Korea, etc etc

[kimbillro]

@Jon Brien , They will never fly again like they used to.

[TheRagingBulll]

Lol WTI cannot even reach $70. Got immediately rejected

[BISON73]

I can live with that…..

[bill h illify]

Well…let’s get WTI to $76…then we may start talking triple digits…work to do yet!

[kimbillro]

@bill h illify , You mean the sign of the 76?