TRADING STRATEGIES FOR CRUDE OIL VOLATILITY

Because of its unique interaction with the world's political and socioeconomic institutions, crude oil offers tremendous liquidity and huge profit opportunities in most market scenarios. Furthermore, the energy sector's volatility has increased quickly in recent years, resulting in strong patterns of consistent returns for long-term “market timing” methods and short-term “swing trades.”

Traders sometimes fail to profit from variations in crude oil prices because they are uninformed of the market's unique features or because they are unaware of the market's hidden hazards, resulting in a loss.

Whether you are a seasoned or inexperienced trader, this article can help you earn some money by trading crude oil.

Because of the current volatility in oil prices, a trader who can forecast the proper direction of the price has a good possibility of profiting.

If oil is now priced at US$85 and the call and put option strike prices are $8 combined, the strategy is profitable if the oil price moves $8. So, whether the oil price rises over $93 or falls below $77, the strategy will benefit.

The term “short straddle” refers to the technique of selling volatility or profiting from a decrease in volatility (or steady volatility). It consists of selling both a put and a call option at the same price. When the price moves inside a narrow range over an extended length of time, a “short straddle” becomes beneficial.

If oil is now priced at US$85 and the call and put option strike prices are $8, then the strategy will benefit if the price of oil moves by no more than $8. As a result, if the price of oil increases to $93 or falls to $77, this approach will be lucrative.

These tactics may work in both ways, so if a trader is interested in oil prices, they can use spreads to benefit while limiting their risks.

A “bear call spread” is a well-known bearish technique that involves selling one OTM option and purchasing another OTM call. The greatest profit for this strategy is the net credit amount, and the maximum loss is the difference between the net credit amount and the strike prices.

The “bull call spread” is a parallel bullish strategy that consists of purchasing one OTM call and selling another OTM call. The greatest loss for this strategy is the net debit amount, and the maximum profit is the difference between the net debit amount and the strike prices.

As a result, traders may possibly profit from fluctuating oil prices, similar to stock prices, by employing these derivative methods.

With knowledge of crude oil trading tactics, you may establish a STO account with access to MT4, one of the industry's premier FX trading platforms, and begin trading right away. For further information, please see the link above.

This post represents the STO Investment Research Desk's personal viewpoint and opinion and should not be considered as investment advice. FX and CFD trading are high-risk investments that may not be suited for everyone; be sure you fully understand the dangers. You might lose part or all of your invested funds.