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

The sharp bounces in equity segment in earlier today have provided support a slight recovery in WTI crude futures. But we reckon that with the persistent focus on a global supply glut and now worries about Chinese demand the foundation for a recovery has yet to be laid.

Trade tips: Commodity futures and options

The prime idea is to use the current rallies for fresh short build ups on every rallies. Since it is giving better entry points for bears, so from current levels having speculation mindset we recommend shorting near month futures. 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.