The ACD Method

For those of you interested, crude oil implied volatility is getting very rich, trading at 52 weeks highs and substantially above historical. A lot of action out on the 125,135 and 140 strikes in Oct and Nov.

On the longer time frame charts we have a really nice plus 3 on the yearly ACD levels. A down was at 85 which we bounced off of almost to the tick and we keep finding support at the yearly A up around the 103 level and the QTR A up around the 105 level.

We are also coming off of an inside month in August where we wicked off both the monthly A up and A down. Typically that sets the stage for an explosive move. Our first level to watch is 109.50, which is the monthly A up.

I should also note for those of you watching the Brent/WTI spread that after bottoming a month back around 1.00 from a high 28.00 or so, we are starting to widen back out trading north of 7 now. The brent/wti is a good way to play the upside move with less risk.
 
Quote from Maverick74:

For those of you interested, crude oil implied volatility is getting very rich, trading at 52 weeks highs and substantially above historical. A lot of action out on the 125,135 and 140 strikes in Oct and Nov.

On the longer time frame charts we have a really nice plus 3 on the yearly ACD levels. A down was at 85 which we bounced off of almost to the tick and we keep finding support at the yearly A up around the 103 level and the QTR A up around the 105 level.

We are also coming off of an inside month in August where we wicked off both the monthly A up and A down. Typically that sets the stage for an explosive move. Our first level to watch is 109.50, which is the monthly A up.

I should also note for those of you watching the Brent/WTI spread that after bottoming a month back around 1.00 from a high 28.00 or so, we are starting to widen back out trading north of 7 now. The brent/wti is a good way to play the upside move with less risk.
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140 strike is deep out of the money! I'm a little confused.. you basically stated that vols were rich.. but its staging a breakout.. that seems a bit of a contradiction.. i'm in a few futures calender spreads.. i'm not quite sure if its safe to sell volatility here.. not attacking you just trying to clarify..
 
Quote from cdcaveman:

140 strike is deep out of the money! I'm a little confused.. you basically stated that vols were rich.. but its staging a breakout.. that seems a bit of a contradiction.. i'm in a few futures calender spreads.. i'm not quite sure if its safe to sell volatility here.. not attacking you just trying to clarify..
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Rich means "expensive" as in high implied vols as in people expecting a large move. Does that make sense. The opposite is lean.
 
Quote from Maverick74:

Rich means "expensive" as in high implied vols as in people expecting a large move. Does that make sense. The opposite is lean.
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i get that.. I'm sorry i typically think of the term "rich" as something you wanna sell... but here you were building the premise that a big move is gonna happen.. not that the actual premium is a good sale..
 
Quote from cdcaveman:

i get that.. I'm sorry i typically think of the term "rich" as something you wanna sell... but here you were building the premise that a big move is gonna happen.. not that the actual premium is a good sale..
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As a general rule of thumb, no matter how high the implied vol, you never want to sell premium in a market that is coiling. If oil suddenly made a large explosive move and the premiums were still rich, that would be a better sale. Anyone selling juice now better have the web address for their local social security office. LOL.
 
Quote from Maverick74:

As a general rule of thumb, no matter how high the implied vol, you never want to sell premium in a market that is coiling. If oil suddenly made a large explosive move and the premiums were still rich, that would be a better sale. Anyone selling juice now better have the web address for their local social security office. LOL.
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Yeah... taking a binary bet on politics... i'm pretty well hedged in CL futures spreads.. not to say a jet up to 130 wouldn't really really hurt.. i've got z3/f4/g4/h4 condors on and a z3/m4/z4 fly on..
 
Quote from toolazy:

my findings are in line with Mav re oil. I ma in couple of oil stocks that behaving fine so far.

for anyone that thinks Syria can only be walk in the park...

http://rt.com/news/russian-destroyer-mediterranean-report-424/

it could be, but chances of complications increasing.... So increased vols are warranted
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i agree.. the issue has now become thrown in the middle of congress and the world to make a mess over.. now a bunch of posturing.. a bunch of hands on triggers.. I personally hope nothing becomes of this.. and not for the sake of my oil trades..
 
Quote from cdcaveman:

Yeah... taking a binary bet on politics... i'm pretty well hedged in CL futures spreads.. not to say a jet up to 130 wouldn't really really hurt.. i've got z3/f4/g4/h4 condors on and a z3/m4/z4 fly on..
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Futures options? Be careful with the basis risk there. Having different months on can get crazy is there is a large move. It's possible your short contract could go 10 pts in the money and your long contract could go the other way!!!!! The move in 2007 did this. We went into massive backwardation on that pop to 147. You could really get hosed on that.
 
Quote from Maverick74:

Futures options? Be careful with the basis risk there. Having different months on can get crazy is there is a large move. It's possible your short contract could go 10 pts in the money and your long contract could go the other way!!!!! The move in 2007 did this. We went into massive backwardation on that pop to 147. You could really get hosed on that.
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not futures options.. and i understand the basis risk with futures options.. expiring contracts on expiring contracts... i'm actual spreading directly in the futures..

so i have a -dec13/+jan14, and a +feb14/-mar14... i've already learned my lesson good and well trading futures spreads.. i was long a bunch of calenders going into the breakout from 95 to 109..
 
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