Oil options traders are showing growing faith the market’s recent tightness can last, bolstering wagers that prices will rally up toward $100.
(Bloomberg) — Oil options traders are showing growing faith the market’s recent tightness can last, bolstering wagers that prices will rally up toward $100.
Open interest on $100 calls over the next 12 months has risen from about 80,000 contracts in the middle of July to 120,000 today. Calls at $90 and $100 are the two most held strikes over the next 12 months and there has also been a smattering of cheap wagers on even higher prices as far out as 2025.
The oil market has shown signs of meaningfully tightening over the summer, with futures trading near multi-month highs as OPEC+ producers continue to rein in output and demand picks up. Recently oil market volatility has also been plunging, making it cheaper to buy options.
The bullish tilt also shows up in market pricing. Brent’s put skew — a gauge of how much more traders will pay for bearish put options over bullish calls — sank to its smallest level in two weeks on Thursday. WTI’s equivalent gauge saw a similar move.
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