Oil traders are making bold moves in the market by purchasing 3 million barrels worth of options contracts, despite ongoing geopolitical uncertainties. Speculators are taking risks, including purchasing 3,000 lots of June $250 call options in US crude oil for a mere 1 cent each, resembling a lottery ticket with potentially high payouts if successful. These trades are paired with $25 put options, and bullish oil options are at record levels due to rising premiums for calls over puts amid tensions between Israel and Iran.
Amidst this speculation, Brent crude oil is trading near $90 per barrel, with WTI also trading above $85, marking the highest prices seen since October. Despite these high prices, oil prices experienced a decline on Tuesday as the Federal Reserve Vice Chair indicated the central bank’s commitment to tight monetary policy. Additionally, the Biden Administration’s announcement of additional sanctions on Iran for attacking Israel added a layer of geopolitical tension, potentially impacting oil supply fears. With the oil markets anticipating Israel’s response to Iran’s actions, the risk premium for crude oil remains uncertain.