FxWirePro: Rosy opportunities for crude bears - Short WTI crude futures or arbitrage using rallies

Technical Watch:

Dear readers, we've been consistently bearish and been advocating suitable trading calls when the commodity was around 60 levels.

Monthly technicals still suggest sell indications as the RSI signaling divergence with the rising prices on daily charts (currently RSI 14 trending at 26.4694). (See rising prices with declining volumes). But compare the monthly prices with volumes then you can have a clear bearish scene as there is positive correlation.

While %D crossover sustains below 20 levels on slow stochastic (currently %D line at 12.2390 & %K line at 4.1836), so overall we don't see any sort of strength in this commodity that can pull back from current levels.

Prevailing prices are well below moving averages both on daily and monthly charts as well.

Trade tips: Commodity futures and options

The prime idea is to use the current rallies for fresh short build ups at current levels or on every rallies. So from current levels having speculation mindset we recommend shorting near month futures for target towards $42.22. Light Sweet Crude Oil (WTI) futures and options are the world's most actively traded energy product. WTI plays an important role in managing risk in the energy sector worldwide because the contract has the most liquidity and most transparency.

If puts are overpriced relative to calls, the arbitrager would sell a naked put and offset it by buying a synthetic puts. Similarly, vice versa when you think calls are getting overpriced in relation to puts. Arbitration can also possible through box spreads where buying debit call spreads and debit put spreads for a risk-free returns. The opportunity for arbitrage in options market exists once in blue moon for individual investors as price discrepancies often appear only for a few moments.