I am Stephen Davis, senior market strategist at Walsh Trading, Inc., in Chicago, Illinois. Contact me at 312 878 2391.

Crude oil started this short trading week on Tuesday, September 2, with strong gains and a 4 ½-week high. Over the weekend, Ukraine continued its drone attacks on Russian oil refineries in an ongoing campaign, causing damage, fires, and significant disruptions to Russia's refining capacity and fuel supply, impacting domestic prices. This is also likely to reduce exports in the near future. 

In my opinion, this strength in crude oil will continue and it will trade to 68.00 and then 70.00. The weekly chart below shows four weeks of higher highs and higher lows. When we see these reversals, they typically go in days of three. Looking at these two chart patterns, I see the trend in crude oil going higher.

A bullish crude-oil options strategy is to sell two October 63.00 puts. These options closed at 63.00 today. That move would bring in $1,260. With that premium, buy one November crude oil 70.00 call at 0.95. The money made on the puts will pay for the call. The market will pay you approximately $250 to do this strategy. Most importantly, the October puts you are selling expire on September 17. 

Crude oil rallies and time decay on the options you sold will work in your favor. Today's low in October crude oil is 63.66 so, in my opinion, selling a 63.00 put is a safe move. If October crude oil gets below 63.00, this strategy is not working. Buy the puts back. 

Have an excellent day.

Stephen Davis
Senior Market Strategist 
Walsh Trading

Direct 312 878 2391 
Toll Free 800 556 9411
sdavis@walshtrading.com  
www.walshtrading.com

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