A week ago, I wrote an article discussing how the options markets can provide clues to future price direction and/or volatility in the crude oil market. In particular, we addressed the question, “how can a trader spot these option clues in advance?”
This morning, we got a signal which may indicate volatility is in the cards again for crude oil.
Crude - Oil - Advance - December - Call
As crude oil has continued its upward advance from late December, call sellers have become increasingly off-sides with their hedging and position taking. In fact, our measure of sentiment in the options market is now off the charts in the 99th percentile. Simply, all investors appear to be on the bullish side of the boat.
We recently saw a similar situation play out in the natural gas market. When the level of market neutral gamma spiked out of its...