A New President's Potential Impact on Oil Prices1. Introduction
The U.S. presidential election in 2024 is set to bring new leadership, with a new president guaranteed to take office. As history has shown, political transitions often have a profound effect on financial markets, and crude oil is no exception. Traders, investors and hedgers are now asking the critical question: how will WTI Crude Oil futures react to this change in leadership?
While there is much speculation about how a Democrat versus a Republican might shape oil policy, data-driven insights provide a more concrete outlook. Using a machine learning model based on key U.S. economic indicators, we’ve identified potential movements in crude oil prices, spanning short, medium, and long-term timeframes.
2. Key Machine Learning Predictions for Crude Oil Prices
Short-Term (1 Week to 1 Month):
Based on the machine learning model, the immediate market reaction within the first week following the election is expected to be minimal, with predicted price changes below 2% for both a Republican and Democratic win. The one-month outlook also suggests additional opportunity.
Medium-Term (1 Quarter to 1 Year):
The model shows a significant divergence in crude oil prices over the medium term, with a potential sharp upward movement one year after the election. Regardless of which party claims the presidency, WTI crude oil prices could potentially rise by over 40%. This is in line with historical trends where significant price shifts occurred one year post-election, driven by economic recovery, fiscal policies, and broader market sentiment.
Long-Term (4 Years):
Over the course of the full four-year presidential term, the model predicts more moderate growth, averaging around 15%. The data suggests that, while short-term market movements may seem reactive, the long-term outlook is more balanced and less influenced by the winning party. Instead, economic conditions, such as interest rates and industrial activity, will have a more sustained impact on crude oil prices.
3. Feature Importance: The Drivers Behind Crude Oil Price Movements
The machine learning model's analysis highlights that crude oil price movements, especially one year after the election, are primarily driven by economic indicators, rather than the political party in power. Below are the top features influencing crude oil prices:
Top Economic Indicators Influencing Crude Oil:
Fed Funds Rate: The most significant driver of crude oil prices, as interest rate policies affect everything from borrowing costs to overall economic growth. Changes in the Fed Funds Rate can signal shifts in economic activity that directly impact oil demand apart from the US Dollar itself.
Labor Force Participation Rate: A critical indicator of economic health, a higher participation rate suggests a stronger labor market, which supports increased industrial activity and energy consumption, including crude oil.
Producer Price Index (PPI): The PPI reflects inflation at the producer level, impacting the cost of goods and services, including oil-related industries.
Consumer Sentiment Index: A measure of the general public's outlook on the economy, which indirectly influences energy demand as consumer confidence affects spending patterns.
Unit Labor Costs: An increase in labor costs can signal inflationary pressures, which could lead to changes in oil prices as businesses pass on higher costs to consumers.
This study exclusively uses U.S. economic data, excluding oil-related fundamentals such as OPEC+ supply and demand information, in order to focus on the election’s direct impact through domestic economic channels.
Minimal Influence of Political Party on Price Movements:
Interestingly, the machine learning model suggests that the political party of the newly elected president has a relatively low impact on crude oil prices. The performance of WTI crude oil appears to be more closely tied to macroeconomic factors, such as employment data and inflation, than the specific party in power.
These findings emphasize the importance of focusing on economic fundamentals when analyzing crude oil price movements for longer term exposures, rather than solely relying on political outcomes.
4. Historical Analysis of Crude Oil Price Reactions to U.S. Elections
Looking back over the last two decades, the performance of crude oil post-election has varied, depending on global conditions and the economic policies of the newly elected president.
Notable Historical Movements:
George W. Bush (Republican): In his 2000 election, crude oil dropped nearly 50% within a year, reflecting the broader economic fallout from the bursting of the dot-com bubble and the events of 9/11. In contrast, his 2004 re-election saw oil prices climb 21.5% within a year, driven by the Iraq War and increasing global demand for energy.
Barack Obama (Democratic): After his 2008 election, crude oil prices surged by 33.8% within one year, partly due to economic recovery efforts following the global financial crisis. His 2012 re-election saw more modest growth, with an 8.3% rise over the same period.
Donald Trump (Republican): His election in 2016 coincided with a moderate 23.8% increase in crude oil prices over one year, as the U.S. ramped up energy production through fracking, contributing to global supply increases.
Joe Biden (Democratic): Most recently, crude oil prices skyrocketed by over 100% in the year following Biden’s 2020 victory, driven by post-pandemic economic recovery and supply chain disruptions that affected global energy markets.
5. WTI Crude Oil Contracts: CL and MCL Explained
When trading crude oil futures, the two most popular contracts offered by the CME Group are WTI Crude Oil Futures (CL) and Micro WTI Crude Oil Futures (MCL). Both contracts offer traders a way to speculate or hedge on the price movements of crude oil, but they differ in size, margin requirements, and ideal use cases.
WTI Crude Oil Futures (CL):
Price Fluctuations: The contract moves in increments of $0.01 per barrel, meaning a $10 change for one contract.
Margin Requirements: As of recent estimates, the margin requirement for trading a CL contract is around $6,000, though this can fluctuate depending on market volatility.
Micro WTI Crude Oil Futures (MCL):
Price Fluctuations: 10 times less. The contract moves in increments of $0.01 per barrel, meaning a $1 change for one contract.
Margin Requirements: 10 times less, around $600 per contract.
Practical Application:
During periods of heightened market volatility—such as the lead-up to and aftermath of a U.S. presidential election—traders can use both CL and MCL contracts to navigate expected price fluctuations. Larger traders might use CL to hedge against or capitalize on significant price movements, while retail traders may prefer MCL for smaller, controlled exposure.
6. Conclusion
As the 2024 U.S. presidential election approaches, crude oil traders are watching closely for market signals. While political outcomes can cause short-term volatility, the machine learning model’s predictions emphasize that broader economic factors will drive crude oil prices more significantly over the medium and long term.
Whether a Democrat or Republican wins, crude oil prices are expected to see a potential increase, particularly one year after the election. This surge, driven by factors such as interest rates, labor market health, and inflation, suggests that traders should focus on these economic indicators rather than placing too much weight on which party claims the presidency.
7. Risk Management Reminder
Navigating market volatility, especially during a presidential election period, requires careful risk management. Crude oil traders, whether trading standard WTI Crude Oil futures (CL) or Micro WTI Crude Oil futures (MCL), should be mindful of the following strategies to mitigate potential risks:
Use of Stop-Loss Orders:
Setting predefined exit points, traders can avoid significant drawdowns if the market moves against their position.
Leverage and Margin Control:
Overexposure can lead to margin calls and forced liquidation of positions in volatile markets.
Position Sizing:
Adjusting position sizes according to risk tolerance is vital especially during uncertain periods like elections.
Hedging Strategies:
Traders might consider hedging their crude oil positions with other instruments, such as options or spreads, to protect against unexpected market moves.
Monitoring Economic Indicators:
Keeping a close watch on key U.S. economic data can provide valuable clues to future crude oil futures price movements.
By using these risk management tools effectively, traders can better navigate the expected volatility surrounding the 2024 U.S. election and protect themselves from significant market swings.
When charting futures, the data provided could be delayed. Traders working with the ticker symbols discussed in this idea may prefer to use CME Group real-time data plan on TradingView: www.tradingview.com - This consideration is particularly important for shorter-term traders, whereas it may be less critical for those focused on longer-term trading strategies.
General Disclaimer:
The trade ideas presented herein are solely for illustrative purposes forming a part of a case study intended to demonstrate key principles in risk management within the context of the specific market scenarios discussed. These ideas are not to be interpreted as investment recommendations or financial advice. They do not endorse or promote any specific trading strategies, financial products, or services. The information provided is based on data believed to be reliable; however, its accuracy or completeness cannot be guaranteed. Trading in financial markets involves risks, including the potential loss of principal. Each individual should conduct their own research and consult with professional financial advisors before making any investment decisions. The author or publisher of this content bears no responsibility for any actions taken based on the information provided or for any resultant financial or other losses.
CRUDEOILH2025 trade ideas
Oil looking good so farNot a trendline trader but look how this trendline is respected
We did approx 400 ticks this week
If the next week is good and we go the same pace we can end up at 75,60 at some point
Looks like we are in uptrend and hopefully next week oil will treat us good
DOUBLE TOP PATTERN | CRUDEOIL - SEP 25Crude Oil (1 Hour Timeframe)
Pattern: Double top spotted in crude oil.
Bearish Indicators Identified: Crude oil is trading within a falling wedge pattern, hinting at potential for a bearish breakout. The price is testing key support zones while repeatedly rejecting at the resistance.
Fundamental Outlook: Weaker-than-expected Chinese demand and Fed rate cut expectations are applying downward pressure on crude prices, although OPEC+ production cuts continue to provide support.
Key Levels: Watching for movement below 6040 for confirmation of bearish trend continuation.
Targets: 6000, 5900, 5850
Breakout Confirmation: A strong move below 6040 will confirm the breakout. Above 6200 could signal reversal.
Risk Management: Set stop losses to manage risk.
Disclaimer: This is a technical analysis and should not be considered financial advice. Trading involves risk, and past performance is not indicative of future results.
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CRUDEOIL BREAKOUT ? FROM FALLING WEDGECrude Oil (1 Hour Timeframe)
Pattern: Falling wedge pattern, signaling a potential breakout.
Entry: Long position above 6040
Target Levels:
1st target: 6100
2nd target: 6140
3rd target: 6200
4th target: 6235
Stop-Loss (SL) : yours
Risk Management: Set stop-losses appropriately to manage risk and avoid potential losses.
Fundamental Factors:
Fed Rate Cut: The Federal Reserve's decision to cut interest rates is seen as positive for oil demand, potentially boosting prices.
Geopolitical Tensions: A recent attack on Iran-backed Hezbollah raises concerns about wider conflict in the Middle East, which could disrupt oil supplies and push prices higher.
Disclaimer: This technical analysis is based on the provided data and should not be considered financial advice. Trading involves risk, and past performance is not indicative of future results.
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Will a Jumbo Rate Cut Fuel Crude Oil Rally? US equities soared to record highs on higher-than-expected rate cuts by the US Federal Reserve. Additional rate cuts implied by the Fed dot plot signals a goldilocks economic scenario. A booming economy coupled with low crude oil inventory levels with intensifying geopolitics could tip crude oil prices into a rally.
Oil prices rose higher yesterday as hard economic landing concerns eased. Despite the rise, oil prices still languish at near-record lows for the year.
This paper posits a long position in CME Micro WTI Crude Oil Futures with an entry at $69.90/barrel with a target of $76.50/barrel and a stop at $67.30/barrel.
JUMBO RATE CUT BY THE US FEDERAL RESERVE
The Federal Reserve cut interest rates by 50 basis points (bps), bringing the federal funds rate to 4.75%-5%. With inflation easing and the labour market softening, the Federal Open Market Committee (FOMC) opted for the aggressive rate cut.
US inflation is nearing its 2% target. Job growth has slowed. Unemployment, though rising slightly, remains low. To maximise employment while guiding inflation on a downward trajectory, the FOMC delivered a 50 bps rate cut.
The unemployment forecasts were revised to 4.4%, up from June's 4% estimate. Inflation outlook was lowered to 2.3% from 2.6%.
NOT ONE BUT THREE OIL BULLS ARE LURKING IN THE SIDELINES
Rate cuts, low inventory, and intensifying geopolitical tensions could tip oil prices into a rally.
Rate Cuts and Crude Oil
Typically rate cuts boost oil prices by weakening the dollar and increasing demand for dollar-denominated commodities.
Tank-Bottom Inventory Levels
US commercial crude oil inventories have fallen to their lowest level in a year. Inventories at Cushing have hit tank-bottom levels. For now, a larger-than-expected drop in US crude inventories for the week ending 13/Sep had a negligible impact on oil prices.
The EIA reported a 1.6 million barrel decline, surpassing analysts' expectations of a 200,000 barrel drop.
Traders dismissed the drop in inventory, attributing it to temporary facility shutdowns on the US Gulf Coast due to inclement weather.
US refineries plan to undertake their lightest preventive maintenance season in three years as estimated by IIR Energy. Higher refining activity should result in increased demand for crude oil in the coming months.
Intensifying Geopolitics
Talks between Libya's rival factions have collapsed leading to a significant decline in Libyan exports. Compounding that are the escalating Middle East conflicts with pagers and walkie-talkies explosions in Lebanon.
OIL BULLS FACE FEEBLE MACROECONOMIC CONDITIONS IN CHINA
Earlier this month, OPEC , EIA , and IEA lowered their 2024 global oil demand forecasts, citing weaker demand from China's slowing economy.
Recent data shows continued weakness. Industrial output growth is at a five-month low. Oil imports are declining with slower refinery output. Property prices continue to fall. Retail sales growth remains tepid.
Housing prices continued to decline, with a 5.3% YoY drop, the steepest since 2015. New home prices fell 0.73% MoM in August, a sharper decline than July's 0.65% drop.
Property investment dropped 10.2% YTD, while housing completions fell 23.6%, indicating that declining property prices are deterring investment.
HYPOTHETICAL TRADE SETUP
When oil bulls lurking in the dark attack, expect oil prices to spike. Options markets are positioning for this scenario. Open Interest Put/Call Ratio at 0.77 as of 18/Sep in CME WTI Crude Oil points to a bullish slant.
CME Micro WTI Crude Oil Futures offer the same exposure to crude oil price movements as standard WTI futures, but at 1/10th the contract size, making them a more accessible and flexible option for traders, enabling more granular hedging.
This paper posits a long position in CME Micro WTI Crude Oil Futures with the following trade setup:
• Entry: $69.90/barrel
• Target: $76.50/barrel
• Stop: $67.30/barrel
• P&L at Target (per lot): $660 ((76.50 – 69.90) x 100)
• P&L at Stop (per lot): $ 260 ((67.30 – 69.90) x 100)
MARKET DATA
CME Real-time Market Data helps identify trading set-ups and express market views better. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs tradingview.com/cme .
DISCLAIMER
This case study is for educational purposes only and does not constitute investment recommendations or advice. Nor are they used to promote any specific products, or services.
Trading or investment ideas cited here are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management or trading under the market scenarios being discussed. Please read the FULL DISCLAIMER the link to which is provided in our profile description.
WTI tests 71.50-72.50 resistance zoneOil traders mull over the demand outlook with China's outlook improving after a slew of stimulus, but the US outlook in question after weak consumer confidence data. EIA stockpiles are due later.
Oil trades below its falling trendlines and its 200 SMA. The price has recovered from a September low of 65.50. However, the recovery has run into resistance at the 71.50-72.50 zone, which buyers will need to overcome to negate the near-term downtrend. A rise above this resistance zone opens the door to 75.00, the falling trendline resistance, and 77.25, the 200 SMA.
Failure to rise above 71.50-72.50 could see the price ease back towards 70.00 before bringing 65.50 into focus.
#202439 - priceactiontds - weekly update - wti crude oil futuresGood Evening and I hope you are well.
tl;dr
wti crude oil: Daily bars looking weak but it does not matter, it’s a small pullback bull trend and it’s going higher. Not a single bar went below the previous so we are max bullish. 72 is very likely get hit on Monday and the first bigger target is 73. There market decides if this bigger bear trend is still alive or we have found a credible bottom at 64.
Quote from last week:
comment: Selling the 4h ema on Tuesday was as perfect as it gets. Bulls bought the lows again and 65 held. Neutral around 68 because both sides have reasonable arguments.
But also this:
Given the max bearish sentiment that everyone and their dog is writing about on x, I favor the bulls to trap late bears much more than I expect continued selling but as long as bears are below the daily ema, they are in control of the market.
comment: Low effort comment last week. Deal with it. Bulls have formed a small pullback bull trend from the 64 low and bears selling below 67 are still trapped. Bears have not gotten one daily bar below the prior bar during the past 8 days. No reason to expect this to change all of a sudden.
current market cycle: bear trend
key levels: 64-74
bull case: 4h tf. Look at it. Every touch is bought. Until that stops, only look for longs. Bulls are only making higher lows and higher highs. Their next target is the obvious bear trend line around 73.5/73.7. Even if bears come around and print something below 70, bulls would most likely buy it for a retest of 71.5 or 72.
Invalidation is below 68.5.
bear case: Bears who sold below 67 were trapped and market just keeps going higher. Bears gave up completely on Thursday and Friday was most likely bulls taking profits and opex things why we stalled. Until bears print something below 69, they have no arguments as of now. Sure we are still inside the bear channel but the upper trend line is still almost 400 ticks away. Best they can probably get is sideways movement 70-72.
Invalidation is above 72.
outlook last week:
short term: Neutral around 68. I have alerts and wait for one side to clearly take control again. Slightly favoring the bulls if they stay above 68 and get momentum going again.
→ Last Sunday we traded 68.65 and now we are at 71. Bad outlook. Bulls took over completely. I still think it was a surprise since market did not even retest anything below 67. Would give the outlook again.
short term: Bullish near the 4h 20ema until it stops working. Take profits at new highs unless bulls show even bigger strength.
medium-long term - Update from 2024-09-22: Bears channel is the main pattern right now but bulls are trying to test the upper trend line. There we will see if the bear trend is has another leg down or we move sideways. There is an argument that the spike below 69 was a trap and we continue inside a range 69 - 75/77.
current swing trade: None
chart update: Added bull trend lines from the 4h tf.
CRUDEOIL FORMING FALLING WEDGECrude Oil Update (4-Hour Timeframe)
[
b]Bullish Indicators Identified: A breakout from a falling wedge pattern is anticipated. Price is expected to first take support from the current zone before a breakout occurs.
Key Levels:
Support: 5480
Resistance: 5830
Breakout Confirmation: Wait for price to hold at support before confirming the breakout towards higher levels.
Risk Management: Always use stop-loss strategies to minimize risks in case of unexpected price movement.
Disclaimer: This technical analysis is based on the provided data and should not be considered financial advice. Trading involves risk, and past performance is not indicative of future results.
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CRUDE OILPreferably suitable for scalping and accurate as long as you watch carefully the price action with the drawn areas.
With your likes and comments, you give me enough energy to provide the best analysis on an ongoing basis.
And if you needed any analysis that was not on the page, you can ask me with a comment or a personal message..
Enjoy Trading... ;)
COT Strategy - Crude Oil LongsDISCLAIMER: This is not trade advice. This is for educational purposes only to demonstrate how I am looking to participate in this market. There is significant risk involved in trading, do your own homework and due diligence.
COT Strategy
Crude Oil (CL)
My COT strategy has me on alert for long trades in CL again this week. To clarify, this was setup last week also, and triggered me long this week via a CCI divergence long trigger. Based on this weeks COT strategy analysis, I think this is a nice market for further upside and will look to enter again via 18MA & 10H8C MAC entry methods.
COT Commercial Index: Buy Signal.
Net Positioning: Max long of last 3 years - bullish.
Small Spec Index: Buy Signal.
Valuation: Undervalued vs Gold & Treasuries.
Front Month Premium Market.
True Seasonal up to Mid October.
Supplementary Indicators: Stochastic.
Remember, this is not a "Long Now" idea. These indicators are not timing tools. They simply tell us that this market could have a move of some significance to the upside, which we will participate in with a Daily long trigger.
Good luck & good trading.
CYCLICAL ANALYSIS - Crude Oil to Go Up To Mid OctoberDISCLAIMER: This is not trading advice. This is for educational and entertainment purposes only to show how I view this market. Trading involves real risk. Do your own due diligence.
My COT strategy has Crude Oil SETUP for longs if we get a TRIGGER (Confirmed bullish trend change). But what do cycles have to say about this long trade idea?
Cycles suggest that we should see an up move in Crude Oil until Mid October/Early November.
I look at many interesting things:
-Using the DOW Arab Titans 50 index as a leading indicator of where Crude Oil may trade to.
-The annual cycle of oil is strong and should not be ignored. It too is supportive of taking a long until mid October.
-The Decennial cycle is supportive of a bounce in oil into mid October.
-Major economic cycles & temporary trading cycles are also indicating an upmove could be imminent for oil.
-Lastly, we see that the previous most similar year of price action (2019) suggests oil could move higher into October/November.
TO BE CLEAR: This does not mean I am going long blindly, I wait for entry TRIGGER (18 MA, 10h8c MAC, Divergence). This market did already trigger via divergence last Wednesday via the CCI (Commodity Channel Index) divergence confirmation.
If you have any questions about my cyclical analysis, feel free to shoot me a message.
I hope you had a good start to your week.
And as always...
Good Luck & Good Trading.
Nice Setup on Crude Oil4 hour chart MACD is showing bearish divergence and also cycling down.
1 hour chart is in a downtrend and CCI is below -100
15 chart shows a downtrend and Fibonacci retracement level of .618 inside a supply zone.
Let's see if we can hit .618 and take the trade short all the way to the 50SMA on the 4 hour chart.
USOIL 24-09Pair : US Oil - Crude Oil
Description :
Impulse Correction ( 38.20% )
Bearish Channel as an Corrective Pattern in Short Time Frame with the Breakout of Upper Trend Line
CHOCH
Break of Structure
Demand Zone
MCLZ2024 - Micro WTI Crude Oil (DEC24): Targeting 72.00Will demand in the oil market continue into the future?
With current geopolitical tensions and conflicts raging on, I believe that the demand for oil is likely to increase into the coming months.
Follow along with my MCLZ2024 chart to stay up to date with @trader9224's current trade idea.
For those new here or looking to follow along, with the new week of trade, comes a new trade plan.
This week I will be focused on the micro WTI future contracts.
Comment below with questions, comments, or a chart of your own!
Weekly analysis crude oilRed line's are support
Green line's are resistance
Only for learning purpose
Options Blueprint Series [Intermediate]: US Election Oil Play1. Introduction
The 2024 US Presidential Election could have a significant impact on global markets, especially energy sectors like crude oil. With key policies and geopolitical tensions hinging on the outcome, many traders are eyeing a potential price surge in WTI Crude Oil futures. Our prior article (linked below) presented a potential opportunity for crude oil prices to rise by over 40% within a year following the election. This could bring WTI Crude Oil Futures (CLZ2025) from its current price of 67.80 to around 94.92.
To capitalize on this potential opportunity, a strategic options play can be used to leverage this potential move, providing not only a chance to profit from a bullish breakout but also some protection against downside risk. This article explores a Breakout Booster Play using options on the December 2025 WTI Crude Oil futures contract (CLZ2025), designed to benefit from a possible post-election oil price surge.
2. Technical Overview
In analyzing the December 2025 WTI Crude Oil Futures (CLZ2025), a strong support level is identified. The 61.8% Fibonacci retracement level aligns perfectly with a UFO support zone at 55.62, suggesting a significant area where buying interest could emerge if prices fall to this level.
The current price of CLZ2025 is 67.80, and the technical analysis points to the possibility of a substantial bullish move following the 2024 US Presidential Election. The projected price increase of 40% could push crude oil prices up to 94.92 over the next year. However, even a more conservative target of 20% (around 81.36) could offer considerable upside potential.
This analysis provides the foundation for constructing an options strategy that not only takes advantage of the potential upside but also offers a buffer zone against downside risk by capitalizing on key support levels.
3. The Options Strategy
The options strategy we'll use here is a Breakout Booster Play designed to take advantage of the expected rise in crude oil prices. Here's how the strategy is constructed:
1. Sell 2 Puts at the 55 Strike:
Expiring on November 17, 2025, these puts are sold to collect a premium of approximately 3.27 points per contract.
By selling 2 puts, we collect a total of 6.54 points.
This creates a buffer zone, allowing us to take on some downside risk while still profiting if prices remain above 55.
2. Buy 1 Call at the 71 Strike:
Also expiring on November 17, 2025, the call is purchased for 6.28 points.
This call gives us the potential for unlimited upside if crude oil prices rise above 71.
Net Cost: The net cost of this strategy is minimal, with the collected premium from the puts (6.54) offsetting most of the cost of the call (6.28). The result is a credit of 0.26 points, meaning the trader gets paid to enter this position.
Break-Even Points:
The position would lose money only if crude oil falls below 54.87 (factoring in the premium collected).
Profit potential becomes significant if crude oil rises above 71, with large gains expected if the projected move to 81.36 or 94.92 materializes.
This strategy effectively positions the trader to profit from an upward breakout while maintaining a buffer against downside risk. If crude oil drops, losses are limited unless it falls below 54.87, at which point the trader would be required to take delivery of 2 crude oil futures contracts (long).
4. Profit and Risk Analysis
Profit Potential:
The key advantage of this options strategy is its profit potential on the upside. If crude oil prices rise above 71, the purchased call will start gaining value significantly.
If crude oil reaches 94.92 (a 40% increase from the current price), the long call will be deep in the money, resulting in substantial profits.
Even if the price rises more conservatively to 81.36 (a 20% increase), the strategy still allows for meaningful gains as the call appreciates.
Since the net entry cost is essentially zero (with a small credit of 0.26 points), the potential profit is high, and it becomes especially powerful above 71, with unlimited upside.
Risk Management:
This strategy comes with a 19% buffer before any losses occur at expiration, as the break-even point is 54.87. However, it is important to note that if the trade is closed before expiration, losses could be realized if crude oil prices have dropped, even if the price is above 55.
Risk Pre-Expiration: If crude oil prices fall sharply, especially before expiration, the trader could face significant losses. The risk is theoretically unlimited because, as the market moves against the sold puts, their value could rise dramatically. If a trader needs to close the position early, those puts could be worth significantly more than the premium initially collected, resulting in losses.
Potential Margin Calls: If crude oil drops far enough, the trader may receive a margin call on the short puts. This could happen well before the price reaches 54.87, depending on the speed and size of the drop. If not managed properly, this could force the trader to close the position at a significant loss.
While there is a built-in buffer, this trade requires active monitoring, particularly if crude oil prices start to decline. Risk management techniques, such as stop-loss orders, rolling options, or hedging, should be considered to mitigate losses in case the market moves unexpectedly.
5. Contract Specs and Margins
WTI Crude Oil Futures (CL)
Tick Size: The minimum price fluctuation is 0.01 per barrel.
Tick Value: Each 0.01 movement equals $10 per contract.
Margin Requirement: Approximately $6,100 per contract (subject to change based on market volatility).
Micro Crude Oil Futures (MCL)
Tick Value: Each 0.01 movement equals $1 per contract.
Margin Requirement: Approximately $610 per contract, offering a lower capital requirement for smaller positions.
Why Mention Both?
Traders with larger capital allocations may prefer using standard WTI Crude Oil futures contracts, given their greater exposure and tick value. However, for smaller or more conservative traders, Micro Crude Oil Futures (MCL) provide a more accessible way to enter the market while maintaining the same exposure ratios in a smaller size.
6. Summary and Conclusion
This options strategy provides a powerful way to capitalize on a potential post-election rally in crude oil prices, while offering downside protection. The combination of selling 2 puts at the 55 strike and buying 1 call at the 71 strike, all expiring on November 17, 2025, creates a structured approach to profit from a bullish breakout.
With current analysis based on machine learning suggesting a potential 40% increase in crude oil prices over the next year, the long call offers unlimited profit potential above 71. At the same time, the sale of the puts at the 55 strike gives the strategy a 19% buffer, with the break-even point at expiration being 54.87.
When charting futures, the data provided could be delayed. Traders working with the ticker symbols discussed in this idea may prefer to use CME Group real-time data plan on TradingView: www.tradingview.com - This consideration is particularly important for shorter-term traders, whereas it may be less critical for those focused on longer-term trading strategies.
General Disclaimer:
The trade ideas presented herein are solely for illustrative purposes forming a part of a case study intended to demonstrate key principles in risk management within the context of the specific market scenarios discussed. These ideas are not to be interpreted as investment recommendations or financial advice. They do not endorse or promote any specific trading strategies, financial products, or services. The information provided is based on data believed to be reliable; however, its accuracy or completeness cannot be guaranteed. Trading in financial markets involves risks, including the potential loss of principal. Each individual should conduct their own research and consult with professional financial advisors before making any investment decisions. The author or publisher of this content bears no responsibility for any actions taken based on the information provided or for any resultant financial or other losses.
Light Crude Oil Futures (CL1!) on the NYMEX struggle
Price Movement
Current Price: The current price is $71.00, showing a recent increase of $2.35 (3.42%).
Trend: The price has been fluctuating within a range, marked by a purple rectangle, indicating consolidation between approximately $60 and $80.
Volume
Current Volume: 1.45 million, suggesting moderate trading activity.
Historical Performance
The table below the chart shows monthly percentage changes from 2013 to 2024.
Seasonality:
March and April tend to have positive returns historically, with April showing an average increase of 4.38%.
October and November often exhibit negative returns, with October averaging a decrease of 2.18%.
Technical Indicators
The chart includes several annotations indicating significant price changes over time.
Resistance and Support Levels:
Resistance appears around $80.
Support is near $60, as indicated by the lower boundary of the consolidation range.
Conclusion
The chart suggests that crude oil prices are in a consolidation phase. Traders might look for a breakout above $80 for bullish confirmation or a breakdown below $60 for bearish signals. Historical data indicates potential seasonal trends that could influence future price movements.
testchecking the first trade date is a very important date to consider if u are gonna dive deep into the gann feild , very long but exciting journal
