Sanctions on Iran to prevail despite Iran’s nuke pact but crude taking a ‘hit’; short strangles

Iran nuke deal which will restrain Iran's nuke activity and it struck with the deal with the hopes of much needed relief to Iran by lifting its economic sanctions. But the sanctions imposed on Iran will not be lifted until 2016 and the deal brings in plenty of headwinds along with it for oil prices.

We kept vouching WTI should halt somewhere surrounding USD 50 a barrel, Brent should hold around USD 55. But some knee-jerk reactions could see us go down a little bit below that for the short-term. However, cautious approach needs to be exercised with this nuclear deal. The deal is expected to allow UN inspectors to press for visits to Iranian military sites as part of their monitoring duties.

However, the access to any site will not necessarily be granted and even if it were to be given, it could be delayed. In return, Tehran will likely be given the right to challenge the UN's request and an arbitration board of Iran and the 6 countries will have to decide on the issue.

Derivative Glimpse: WTI crude

Crude accounts massively as resultant force of Greece defaults 1^st and downtrend to halt in range. As we expect range bound price bands ($57-$45) we kept recommending short strangles and we continue to remain firm on this call.

The reasoning being quite simple where we don't anticipate any drastic change in the prices which means we are taking opposite position and pocket in the net premiums.

The short strangle, which is a neutral strategy in options trading that involves the simultaneous selling of (10%) Out-Of-The-Money call and (-10%) Out-Of-The-Money put of WTI oil and of the same maturity preferably shorter time frame.

The short strangle option strategy likely to derive limited returns to the extent of premiums received from both the side, unlimited risk options trading strategy that is taken when the options trader thinks that the underlying asset will experience little volatility in the near term.

Short strangles is credit spreads as a net credit is taken to enter the trade.