Futures Measures

Crude Oil is Officially Chill

Futures Measures

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Crude Oil has returned to low volatility values relative to its peak in 2018.

Options are now cheaper than they were in 2018 because OVX has returned to its lows.

This turns crude oil into a pure direction play (long/short futures, short puts/calls, debit spreads, credit spreads, etc.) as we cannot employ short premium strategies with IV this low.

Additionally, the crude term structure has returned to backwardation along with higher prices than the last time crude was in backwardation.

Some possible trade ideas are trading the calendar spreads that have lower volatility than the outrights. With expected moves of around 1/10th of the underlying, calendar spreads are a great way to get exposure to the crude market without the wild swings of being long or short the outright contract.

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