Re: Oil options [C]
Jeffrey
Just got off the phone with Vinit.
DB stopped marketmaking OTC oil options - for short dated I'd go for exch traded - better liquidity and lower transaction costs in and out.
My central scenario - Kerry Lavrov meeting Friday will be a bust and the Crimea referendum this weekend will result in "yes" given the 59pct ethic Russian makeup. Sunday / Monday sanction rhetoric from ranging from g8 expulsion to Iran-style bank embargo is raised a notch. Russia follows with more threats of counter-sanctions. My sense is the Obama 5m of 696m SPR release is to show Merkel and co he will step in. He needs to because there are 8 small European and Baltic countries that rec 70%+ of their gas from Russia. Germany gets 30%.
Cross asset correlations outside of the US are increasing past few days - eg copper and the Turkish lira hourly charts are on top of each other past 4 days. I'm worried there is a 30-40pct(?) chance of a hard risk off move in markets in first half of next week - more focused on European equities, copper, EM FX (Turkey, ZAR, Ruble etc) than SPX. In that scenario oil is way up.
Exchange WTI calls - there are 2 options (as of 3pm est):
5day expiry 17march 2014 underlying clj4 97.92
and
35d expiry 16april2014 underlying clk4 97.59
** The 5 day options are a bit short - one possibility is sell a 3usd out of the money put (95.5 strike) for 20cents and buy a 2usd OTM 100 call for 25. Net pay 5cents. But 5d is a bit short for me.
**For 35d expiry You could look at selling 91.50 (6usd OTM put) for 56cents and buying 103c (5.5usd OTM) for 58cents or the 102c (4.5usd OTM) for 76cents.
CL1
If 5d is too short and 35d is too long / not enough gamma, Tazia may be able to source liquidity from the street. Am Cc'ing her for any live pricing or additional comment
Best
Nav
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Jeffrey - apologise if this long to execute next time we'll be much quicker.
-- Nav Gupta
Importance: High
Classification: Confidential
I do want to talk to u about this, they spent too much thinking about options here, let me know when u have couple minutes.
Vinit Sahni