Oil has been down hard for weeks now, but could go further down or break up. It has basically been in a wedge for most of last week. Its ready to blast up or take the next leg down. I have a bias to the upside as its over due for a rally. So how we suggest to take the trade:
Go LONG December CL (Oil) @ 94.50ish. Then buy a December Put @ 96.50. Current price is 2.50ish. So about 50 Pips premium to loose if Oil crashes down. There is about 10ish days left on the option. This is our stop, so need to place a stop on the CL position. Our target is 98 - last resistance area. So -2.50 loss on the Put option but +3.50 gain on the CL, yielding +1.00 for a -0.50 risk. If it gets to 98 quickly there may be a bonus on the remaining value in the Put. Obviously if price ends up somewhere in the middle, we will have to deal with the position accordingly and we will post updates through the week. We give up some profit to manage risk…lets hope its a good idea… :45: