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Sunday, July 12

Selling Oil Futures ITM Call Options for a high probability bearish trade.

View on Oil: Bearish for next few weeks due to supply concerns from Iran and increasing rig counts.

The short term resistance is around $56.53 as drawn out on the chart below. In order to reduce risk on our bearish position, I am looking to short the September $53 in the money (ITM) call option which is trading at around $3 at the moment. This would limit our losses which will only begin once the contract trades above $56. 

Meanwhile, we will be able to capture strong delta from this contract and earn $3 if the contract closes below $53. 

Should oil continue to slide below $50, I will look to short the then current futures to maximize our profits in the downtrend.



Chart: Crude Oil Chart


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