Puts or Calls on Oil Futures

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Is it time for puts or calls on oil futures?

Oil futures options reacted to a recent
fall in futures prices.

At issue is continued global recovery or
a slowdown and even a double dip
recession.

www.Options-Trading-Education.com

The US labor market is growing but
slower than necessary to keep up
with population growth.


In the last two months fewer than
200,000 jobs have been created each
month according to government
statistics.


This is a dramatic fall from the more
than 200,000 figures previously.

The sovereign debt dilemma in Europe
continues to plague markets.


Both France and Greece recently
elected socialist leaders in what
appears to have been a referendum on
policies to stimulate the economy, pay
debts, and create jobs.


The strict austerity measures
instituted across the board in Europe
have threatened to cause a recession
later this year.


The Euro Zone is second only to the
USA in size of its economy.

Thus any options trader considering
puts or calls on oil futures must look
at the effects of a European
recession on oil prices.


Benchmark crude futures were
selling at around $110 a barrel just
three months ago.

Now benchmark crude trades in the
$97 to $98 range.


Anyone who purchased puts on oil
futures three months ago has done
well.

Now, the question is if crude prices will
continue to fall or if a rebound will
make it smart to buy calls on crude oil
futures.


Purchasing a put on oil futures gives
the buyer the right to sell oil futures
specified in the contract at the
contract price any time up until the
end of his options contract.


This can be profitable if the price of oil
falls.

Because the trader is under no
obligation to sell if the oil futures price
does not react as expected his
potential losses are limited to the price
of the contract.


Purchasing a call on oil futures gives
the buyer the right to buy oil futures
specified in the contract at the
contract price any time up until the
end of his options contract.


This can be profitable if the price of
oil rises.

Because he is under no obligation to
sell if the oil futures price does not
react as expect his potential losses
are limited to the price of the
contract.


Either puts or calls on oil futures
may be profitable depending on
where the economy goes.

The Euro Zone situation seems to be
driving everything these days.


United States manufacturing is in its
35th month of expansion.

Every times the ongoing growth of US
manufacturing is reported the markets
go up and oil prices inch higher.


Then the news from Europe drives
prices down again.

What is best now, puts or calls on oil
futures?


The most recent issue from Europe is
the uncertainty over whether new
socialist governments will be able to
stimulate their economies, increase
employment, and solve the debt
crisis.


If they are unsuccessful the debt
crisis will worsen, unemployment
will rise, and the European Union
could fall apart.


The ongoing crisis in Europe is largely
responsible for decreased exports
from China as the Euro Zone is their
biggest customer.


As Euro Zone anxiety continues
traders ponder whether puts or calls
on oil futures will be more profitable.


For more insights and useful
information regarding options and
options trading, visit

Puts or Calls on Oil Futures

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