The oil complex has been on a tear the past three days with some pretty explosive moves to the upside. Although I had anticipated and had played this move to the upside, it has gone much farther then I imagined it would. Most of the move started after the DOE came out with its weekly reports and showed draws accross the board. The other thing aiding this upmove is the start of the new quater and new money flowing in.
The fact that most people have forgotten is regardless of the small draws seen last week, this market is still way over supplied with inventory builds at multi decade highs. There are still a lot of issues out there that need to be resolved. Housing continues to suck...GDP continues to slow on a sequential basis...and where are the jobs? We can't have any sustained recovery on without jobs.
I know that the fed has hinted towards QE2...but with a balance sheet already carrying well of 2 trillion, what is the talked about 500 billion really going to do? And even if it is effective, is it sustainable.
Anyways enough about my rant...I have gone short all three products in the oil complex via call spreads.
RBOB
Really RBOB should be the weakest of them all as we have exited the peak driving season. And this is evidenced in the 20cts under HO. RBOB is coming up against its 200 day moving average, which is spot that I think it will fail at, and we probably get a trade back towards 2 bucks.
I sold 5 of the 2.08/2.15 Nov Call spreads.
I sold 5 Nov 80/83 call spreads and I also sold 5 Dec 68/70/80/82.50 unbalanced Iron Condors.
Lastly I sold 5 Nov 2.25/2.30 call spreads.
To to point out to everyone when trading energy options they expire the month prior to the month your are trading. So the Novy options will expire in October and the Dec options will expire in Nov.
I am short the USO myself but some of the smartest oil traders are saying Oil is going up. I think it's all about the $. Watch it if it continues down, oil up. I personally think the $ is going to catch everyone with their pants down and will reverse pushing the EUO and Gold/Silver down shortly. We'll see.
ReplyDeleteMeant to say pushing the EUO UP since it's a pro-shares ultrashort against the Euro. This is happening today already.
ReplyDeleteSo last week I used the downmove to work my way out of most of these spreads for just about break even as the momentum of this QE2 talk feels like it has more room to push the dollar lower and keep prices propped up at least until the fed meeting during the first week in Nov. I did however keep the 80/82.50 short call spread leg of the Dec Crude Iron condor.
ReplyDeleteI just wanted to work out of my short exposure as I think I am early and the effects of all this QE2 has trades buying the rumor and inflating prices.