The technicals for this commodity still suggest sell indications. In between last three days upswings a bearish shooting star has popped back again a day before yesterday when EIA's inventory check was due.
Now we hope that you get a little sense of understanding that how technicals discounts all fundamental news.
In addition to that RSI is signaling downward convergence with the slumping prices (currently RSI 14 trending at 30.6177).
While slow stochastic approached below 20 levels but there is no traces of %K crossover (currently %D line at 16.9236 & %K line at 10.7940), so overall we don't see any sort of strength in this commodity that can pull back from current levels.
We spotted out the series bearish candles like dojis on intraday charts and current price has fallen below moving average curve.
So the recommendation would be "long vertical put spread" that will cuts down the exposure you have against dubious rallies in anyone's mind, but more significantly it will also reduce the exposure you have to Vega, the relative effects of volatility on the option prices.
Hence, fresh longs in crude is not yet suggested, instead you will long on 2W -0.51 delta ATM put option while simultaneously short the 3D -0.15 delta 2.5% OTM put option. Since the premium will be higher for the higher delta versus the lower delta this trade will be established for a net debit.
One way of minimizing the avid appetite with a naked long put has for your precious capital is to spread much of the risk by using vertical spreads.
Hence, we constructed the above strategy by shorting (-2.5%) deep Out-Of-The-Money put with the same maturity so as to turn vega into correspondingly positive.
Rationale: We kept reiterating often and often, the option's delta and vega would have the huge impact on a long put position should the market bounce.


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