FxWirePro: After Greece, crude inventory and dollar strength, now time for shorting WTI crude strangle

For now, EOD technicals show some sigh of reliefs for trade laggards who were stubborn holding bullish view in this commodity as they must have trimmed leftover money investing in this commodity.

Dear readers, unless & until trade discipline is adopted the portfolio neither any strategy nor any fund managers in this world rescue from potential risks. As saying legendary goes "Don't ever be in love with a particular stock or an asset class, instead be in love with asset quality and prevailing trend of that asset".

Our recent targets achieved at below US$55 a barrel!! Aftermaths of long lasting Greece turmoil and lingering dollar strength and the dramas of crude inventory levels in WTI have managed to trigger the price points what our research calls on crude had generated a week ago.

Therefore, for little while from now let's be patient and cautious in this commodity. We've devised some shrewd trade idea and formulated strategy for those who can't hold their nerves and is suitable for current condition.

Derivative Glimpse: WTI crude

As we expect range bound price bands ($57-$45) we recommend shorting strangles. The reasoning being quite simple where we don't anticipate any drastic change in the prices which means we are taking opposite position and pocket in the net premiums.

The short strangle, which is a neutral strategy in options trading that involves the simultaneous selling of (10%) Out-Of-The-Money call and (-10%) Out-Of-The-Money put of WTI oil and of the same maturity preferably shorter time frame.

The short strangle option strategy likely to derive limited returns to the extent of premiums received from both the side, unlimited risk options trading strategy that is taken when the options trader thinks that the underlying asset will experience little volatility in the near term.

Short strangles is credit spreads as a net credit is taken to enter the trade.