Oil Volatility is Probably Too Cheap

In Wednesday’s webinar ‘2021 Trading Secrets Every Investor Needs to Know’

Frank Gregory (our resident DC Insider) pointed out that the 1st thing new President Joe Biden wants to do is rejoin the Paris Accords.

To many this might mean ‘oil is going to sell off.’

I personally think oil is going to have a strong rally in 2021 for two reasons:

  1.  Increase in demand as the economy turns on
  1.  Decrease in supply and exploration

Mr Biden is not going to cancel the use of oil,  or even fracking,  but in joining the accords and in making small steps to reduce exploration,  the price of oil can be greatly effected.

Think I am wrong,  recall the price action of Oil the first two years of Mr Obama’s presidency,  which also came with a stronger economy and more oil exploration restrictions:

WTI futures (light sweet oil crude futures traded on CME) doubled over 2 years from just over 46,  to just under 92.

This is why,  only a three weeks away from Joe Biden being sworn in,  I was surprised to see OVX,  the Oil VIX near 3 month lows:

Especially knowing that when oil prices rise,  OVX tends to go up.

I think the 1st half of the year is going to be one of the most bullish oil periods we have seen in some time.

With Oil Volatility relatively cheap,  I would NOT suggest playing in USO (it has rolling issues similar to VXX),  but playing directly in the Energy companies…

Good news,  VXXLE:  the VIX of XLE is also the cheapest its been in 3 months:

I would be a buyer of XOM,  CVX,  BP, and RDS mid-range call options.

The exact trade I would do will be covered next week in the Special follow up webinar Frank and I are planning for Sharp BETS subscribers next week.

If you missed yesterday’s webinar catch it here:  LINK.

Your Only Option, 

Mark Sebastian 


DISCLAIMER: FOR EDUCATIONAL AND INFORMATION PURPOSES ONLY; NOT INVESTMENT ADVICE. The materials presented from Option Pit LLC are for your informational and educational purposes only. Neither Option Pit LLC nor its employees offer investment, legal or tax advice of any kind, and the analysis displayed with various tools does not constitute investment, legal or tax advice and should not be interpreted as such. Using the data and analysis contained in the materials for reasons other than the informational and educational purposes intended is at the user’s own risk. 

DISCLAIMER: OPTION PIT LLC IS NOT AN INVESTMENT ADVISOR OR REGISTERED BROKER. Option Pit LLC is not responsible for any losses that may occur from transactions effected based upon information or analysis contained in the presented materials. Specific trading ideas or strategies discussed in the presentations or materials are entirely illustrative and do not constitute the solicitation of a transaction (or transactions) or a recommendation to execute a particular transaction or implement a particular trading strategy.

DISCLAIMER: TRADE AT YOUR OWN RISK; TRADING INVOLVES RISK OF LOSS; SEEK PROFESSIONAL ADVICE. To the extent that you make use of the concepts with the presentation material, you are solely responsible for the applicable trading or investment decision. Trading activity, including options transactions, can involve the risk of loss, so use caution when entering any option transaction. You trade at your own risk, and it is recommended you consult with a financial advisor for investment, legal or tax advice relating to options transactions.

Leave A Response

* Denotes Required Field