To The Moon

The biggest negative news for the crude oil market is getting closer and closer.

Since the unified production cuts brought about by COVID-19 pandemic in 2020, it may be loosened for the first time in October 2024. Saudi Arabia and Russia, the main members of OPEC +, announced at the OPEC + meeting in June that they would gradually relax the voluntary reduction of crude oil production in the future.

The voluntary reduction of crude oil production will be approximately 2.2 million barrels per day, accounting for 20% of the total reduction. Although the relaxation of production cuts will only be gradually released, it has brought a lot of impacts to confidence in crude oil market demand. Therefore, last Friday night, as soon as the rumors were released, the oil price immediately hit a new low last week, which shows that the market is very sensitive to this policy.

1. Technical indicators in the crude oil market are still valid

As mentioned earlier, one of the key points of the current oil price is US $82/barrel, and the other is US $72/barrel.

No matter which side of the breakthrough, it will often accelerate in the direction of the breakthrough. The current market is around $72, and a rapid deviation from this range line is a signal for the oil price to choose the direction. As a result, due to the current fundamental factors, the probability of choosing a downward trend is relatively high.

Don't rush to buy crude oil at the bottom. When the oil price accelerates its decline, the decline is often beyond imagination, remember to remember.

2. How should we trade?

Options, and only options are the most suitable trading method. Whenever a certain product encounters such a situation that it is ready to break through, but is not sure about the direction of the breakthrough (even if it feels certain, there are often accidents), buy medium-and long-term call or put options to wait for the market direction It is the safest way.

At present, crude oil has technically reached the critical point of breakthrough, and the amplitude is not small on either side. At this time, it is the easiest trading strategy to chase and buy call or put options on whichever side breaks through. Due to the fixed loss of buying options, if there is a false breakthrough in the market, the position loss will be limited. If the direction is judged correctly, the investment income of the position will be based on multiples. Therefore, in the face of the current situation of crude oil, it is recommended that you buy put options when crude oil breaks through $72, and call options when it breaks through $82, so that you can better capture the corresponding crude oil market with confidence.

If you don't have futures options,you can use crude oil-related ETF options instead. Or you can buy crude oil put options that expire in December, and the strike price can be set at $60 (premium is relatively cheap, and $60 is an important price of oil price). In fact, you don't have to wait until the oil price reaches the strike price, and the option premium has already started to make profits. At that time, you can consider withdrawing the principal and letting the profits run. Maybe we will witness another big oil price market.

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