Saudi ‘Day of Rage’ Lures $200 Oil Call Options

[Godhumor]

Source: Bloomberg

Options traders are betting more than ever that crude oil is heading to $200 a barrel as some websites call for a “Day of Rage” in Saudi Arabia and anti- government protests spread in the Middle East and North Africa.

...

“The price of oil is going to go up, whether you like it to or don’t,” said Juerg Kiener, chief investment officer at Swiss Asia Capital Ltd. in Singapore. “If Saudi Arabia fails, then I say you have a fire in the house. They gave out $30 billion of money so maybe they’ll buy time. But I don’t see the problems disappearing.”

Call options grant the holder the right, but not the obligation, to buy a security at an agreed price before a set date. The $200 June New York crude options expire May 17. Oil rose to $106.45 a barrel today, the highest intraday price since Sept. 29, 2008.



Read more: http://noir.bloomberg.com/apps/news?pid=20601010&sid=aHT1a.K2lIaI

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More complete explanation - a Call "locks in" a price that an investor can buy oil at on a day in the future (The more unlikely an event happens, the smaller the fee to lock in). The bet is that oil will be above the call point, so the investor buys it at the locked in price and then sells it at the true value (Or holds it if he or she thinks it will continue to go up). If it is under the call price, the investor does not exercise his or her call option and is only out the fee paid.

In this case, people are now beginning to bet that oil will be above $200 in June. It is still considered an unlikely event due to the proximity of the time and almost doubling the current price of oil. However, the odds are now attractive enough that they're pulling in investors.

Yes, it is very similar to gambling.

[Skink]

1. I prefer to think of it as the spread

[50000feet]

2. $200

and possibly higher. A recent article in the FT, something of a poll of investor sentiment, said if another oil producing state falls (Oman, Bahrain, Algeria, Nigeria, etc.) oil will hit $150-$220, and if Saudi goes "you can pick any silly number you care." Tighten your seat belt and hold onto your hat, this ride's going to be interesting.

[Godhumor]

3. Right, essentially options investors are betting that another ME country is going to fall

In the next three months (Or Libya will go scorched earth and destroy/cease all its oil output to the rest of the world for an extended period of time).

[50000feet]

4. Yes, exactly,

and the odds of that happening are very high, approaching almost a certainty in my more dominant feeling on the matter. Egypt continues in respects to lead the way in this ME movement, still fomenting for change, salvaging (and presumably in due time releasing) documents evidencing crimes perpetrated by the Mubarak regime, etc. Libya looks to me that it will not emerge soon from its own struggles---it could take months to settle a new power base in that country, and who knows what will happen in the meantime and what the outcome will be. Saudi evidently sent tanks to Bahrain, where protests continue to escalate. And on it goes.

Said Siras Abi Ali, a Gulf expert at the risk group Exclusive Analysis, the Middle East is now in the vortex of multiple uprisings that will create turmoil for years and destabilise oil supply for a long time. "The Arab world is not going to start behaving like the Swiss," he said.

[BeFree]

6. No Swiss?

""The Arab world is not going to start behaving like the Swiss,""

And there are certain people who will do everything they can to make certain of that, eh?

These price fluctuations are not good for the oil companies.
And there is little reason to believe that people seeking freedom are going to quit selling their oil when they get their freedom.

These capitalists pigs are gaming the system to make short term profits and hoard more money to themselves.

That is 9/10ths of the rise in crude.

[50000feet]

17. They won't quit selling their oil

in the long run, but we will certainly see short run supply fluctuations. The larger problem from the US/UK vantage point is these people will use the oil for their own economic development. That's taboo, the worst sin.

[Shadowflash]

5. As much as that would suck

Because gas prices would go sky high and it would really put people in a bad position, financially, It may be what's needed to FINALLY piss people off enough to get some renewable energy programs going.

Sooner or later it's going to happen. It might as well be now.

[krabigirl]

25. Agreed.

[Zoeisright]

7. See? This is what I mean about oil on the commodities market.

It doesn't belong there. The oil is still flowing, with no disruptions. But Wall Street is getting rich off the pain of most Americans.

[Godhumor]

8. This a gamble on future movement--not an influence on current prices

It is more an indicator that some investors think this might happen and are willing to pay a fee to gamble on it. Options do not really dictate price in the commodities market.

But, yes, your point is well taken.

[sulphurdunn]

9. If you have any faith left

in the American political system consider this: We've had 35 years of clear warning and repeated economic shocks that this was inevitable and yet nothing has been done but to insure business as usual. If we want to live we can't wait for the politicians to act. They won't. Unless it is to destroy us, civilization and the planet.

[KeepItReal]

10. News here in Australia said price increases based on nothing but fear right now

Supply has not been disrupted... Just energy traders making money on a commodity.

[50000feet]

18. I disagree.

Supply has been disrupted, by as much as 1mbpd. That's not a small amount of oil.

[think]

11. And when oil hits $200 a barrel

America should dump it's strategic reserves on the market. Then let the price plummet and buy the oil back up after it free falls.

Now that would be strategic.....

[Canuckistanian]

21. How much do you think is in the reserves?

I'll tell you - not enough to make a DENT in the worldwide oil market. You'll see MAYBE a 10% reduction in America. The rest of the world will see zilch.

[Javaman]

24. The strategic reserves only hold enough for 3 months.

and that oil will only go to industries crucial to the industrial/production base.

Aka the military.

the effect at the pump will be marginal at best.

We are entering into a new era. Get used to it.

I just get so amused when people get bent out of shape over "speculators" when everything on the market is speculation, but god help us all if oil goes up. LOL Then it's a crime and a scam! LOL

we are gas guzzling oil sucking fools.

remember, the oil is not ours.

[Lucky Luciano]

12. Useless options. They are no bid @ $0.16.

The 170 Calls are $0.17 @ $0.22 which is a reasonably tight market considering the stratosphericstrike. The $150 callsare $0.40 @ $0.43 and they are tradeable. Watch large changes in open interest for the 135-150 strikes to know ifsome is placing a "real" bet.

[Celebration]

13. Don't discount the ties

Between the Muslim Brotherhood and the holders of these call options. The whole point is to drive up oil prices high before fully exploiting the USA fields. By then the Middle East will not have much oil left and be stuck with our T Bills in our depreciating currency.

But, for all this to take place, we need a bit of anarchy in Saudi Arabia. For that *we* use our traditional ties with al Qaeda and the Muslim Brotherhood.

[Lucky Luciano]

15. How much is your subscription to tinfoil quarterly? nt

[Hugabear]

14. Pretty soon, filling up your gas tank will be a luxury reserved for the rich

If this shit keeps going the way it is, the vast majority of Americans will no longer be able to afford to drive anywhere...

[Gin]

16. any excuse to rape the public....wait... the quarterly reports will

show record profits again...when the analysts state a possible price in the future as in 5.00 a gallon..guess what..the market hits that price....hmmmmmmmmmmmmm!!!

[krabigirl]

26. Food will be pretty expensive, too.

[roamer65]

19. We'll invade Saudi Arabia to insure oil production.

That will kick off World War III.

[sarcasmo]

20. Does 200 a barrel make it 10 dollars a gallon?

[Nossida]

22. hmmm

one could 'almost' get the impression, the
current turmoil in the Middle East is being
caused by the Oil Oligarchs, and their
Speculator Friends, simply to drive the
price into Orbit.

A silly notion?

[Vinee]

23. and/or to derail any chances of Obama getting reelected.