Traders have alighted on what some believe to be a one-way bet in the most important commodity market: oil prices going to $100 a barrel
Traders have alighted on what some believe to be a one-way bet in the world’s most important commodity market: oil prices going to $100 a barrel.
They have scooped up call options tied to Brent and West Texas Intermediate crude-oil prices reaching $100 by the end of next year. Oil prices haven’t topped that milestone since 2014, when a gush of U.S. crude depressed energy markets. Owners of $100 options—now the most widely owned WTI call contracts on the New York Mercantile Exchange—are making a leveraged bet that oil prices will hurtle higher after already surging more than 40% this year. The roaring rally, goosed by thawing coronavirus restrictions, has lifted WTI prices toat almost $70 a barrel and average U.S. gasoline prices above $3 a gallon, according to GasBuddy.
The popularity of $100 options is another example of traders converging on seemingly outlandish wagers they consider to be almost guaranteed ways of making money. Analysts say oil is unlikely to zip to $100 any time soon becausefrom the shock of Covid-19 and major producers are lifting output in response to resurgent demand.
“Everyone’s been looking at it,” Adam Webb, chief investment officer of trading firm Blue Creek Capital Management LLC, said of $100 call options for oil delivered in December 2022. “It’s a no-brainer.”
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