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Investing in Today's "Oil Boom" |
The dollar had a rough day today as journalists began anticipating some devaluation in the greenback and a large rise in oil prices. What traders and actual investors were thinking is more uncertain but a correction like this is not uncommon and does not necessarily constitute a trend. However, it does present some interesting option trading opportunities.
Some of the volatility could be reasonably attributed to investors preparing for the OPEC meeting next week. As OPEC countries are currently shipping above quotas anyway, I would be surprised to see a significant cut in production turn into reality next week. The Russians are indicating that they may support the potential production cuts from OPEC to help defend the price of oil.
I suppose after a 70% decline in oil prices the supply side of this market would have to start attempting to take some action eventually. However, I suspect that the volatility we are seeing is merely a reaction to some "verbal intervention." Than any fundamental shifts in supply or demand.
In the video today, I will walk through a few ideas around the recent market action by trading short options. If you have never shorted an option before, check out our learning guides on short option trading to get started. For a little more information about how OPEC works and the affects they have on oil prices, check out this series of videos.
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