Traders Bet on $30 Oil as OPEC Plans Talks on Output

Discussion in 'Commodity Futures' started by cstfx, Nov 14, 2008.

  1. cstfx


    Nov. 14 (Bloomberg) -- Oil traders made their biggest bet yet that the Organization of Petroleum Exporting Countries will fail to prevent crude prices from plunging below $30 a barrel.

    Trades in crude-oil options contracts that would allow the holder to sell oil for February delivery at $30 a barrel reached 1,407 on the New York Mercantile Exchange yesterday, making the contract the day's second-most active, exchange data show.

    OPEC, the supplier of about 40 percent of the world's oil, plans to meet Nov. 29 in Cairo to discuss another output cut after crude oil touched $54.67 a barrel, a 21-month low, yesterday. The 13-member organization cut production by 1.5 million barrels a day at a meeting in Vienna last month.

    ``Somebody is buying a little bit of insurance with a very deep out-of-the-money put option,'' said Tim Evans, an energy analyst with Citi Futures Perspective in New York. ``It's very exciting to think about $30 oil, but are we going there? Most likely not.''

    The February $30 put contract fell 9 cents to settle at 11 cents yesterday after trading as high as 45 cents, or $450 per contract, according to data compiled by Bloomberg. It hadn't traded as of 10:15 a.m. Sydney time. The contract was yesterday's most active after December $55 puts, which dropped as futures prices rallied. December options expire Nov. 17.

    Open interest on the exchange for the $30 February put options was 1 contract, or 1,000 barrels of oil, Nov. 12, according to Bloomberg data.

    Oil Futures

    Crude oil for December, the contract closest to delivery, rose as much as $1.72, or 3 percent, to $59.96 a barrel on the New York Mercantile Exchange. It was at $58.53 a barrel at 11:07 a.m. Singapore time. Prices have tumbled 60 percent from a record $147.27 on July 11.

    Oil for February delivery was at $60.11 a barrel, up 11 cents, at 9:59 Singapore time.

    ``The person who's buying those February puts right now, all they need is one spike down for it to be profitable,'' said Ron Madden, a broker/trader with Alaron Trading Corp. in Chicago.

    Options prices typically increase as the futures market approaches the strike price, so a $30 put option would become more valuable to a trader who bought it yesterday if the crude price falls, Madden said.

    ``It doesn't need to touch $30,'' Madden said. ``That person might see it profitable if crude touches $50. The sooner it happens, the quicker those puts are going to make a profit.''

    OPEC's Cairo meeting will be held in conjunction with a scheduled annual assembly of the oil ministers of the Organization of Arab Petroleum Exporting Countries.

    Non-Arab members of OPEC, including Venezuela, Iran and Angola, will be invited to participate in talks about the oil market after the OAPEC meeting, Chakib Khelil, OPEC's president, told Algerian radio yesterday.
  2. cstfx


    A followup:

    Feb 30.00 calls, quoted in the article from 7 days ago @ 9 cents closed today at 30 cents. Nice threefold increase in 7 days
  3. rros


    calls or puts?
  4. HLB


    if anyone will sell me CL FEB 30 CALLs at quoted prices I'll become zillioner ;-)
  5. cstfx

    cstfx bad.