Oil traders raced to abandon complex, bearish options trades in U.S. crude this ...
NEW YORK - Oil traders raced to abandon complex, bearish options trades in U.S. crude this week, after the market rapidly shifted to reflect tighter supplies at the key Oklahoma storage hub over the past month, leading to a surge of activity in a typically illiquid corner of the market.
Trading in U.S. crude spreads, a proxy for expected inventories in Cushing, has been roiled, leaving traders scrambling to ensure they are not caught on the wrong side of the rally. That volatility extended to the calendar spread options market as well, which is normally quiet. Volumes in CSOs have surged, according to data from CME Group’s daily bulletin and brokers executing the deals, with about 12,500 lots of put options on the October/November U.S. crude spread unwound on Monday.
The U.S. crude futures curve CLc1-CLc2 flipped this month to backwardation, where near-term prices are higher than forward prices, an indication of tightening supply.
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