Options Blueprint Series [Intermediate]: US Election Oil Play

24 בספט׳

1. Introduction

The 2024 US Presidential Election could have a significant impact on global markets, especially energy sectors like crude oil. With key policies and geopolitical tensions hinging on the outcome, many traders are eyeing a potential price surge in WTI Crude Oil futures. Our prior article (linked below) presented a potential opportunity for crude oil prices to rise by over 40% within a year following the election. This could bring WTI Crude Oil Futures (CLZ2025) from its current price of 67.80 to around 94.92.

To capitalize on this potential opportunity, a strategic options play can be used to leverage this potential move, providing not only a chance to profit from a bullish breakout but also some protection against downside risk. This article explores a Breakout Booster Play using options on the December 2025 WTI Crude Oil futures contract (CLZ2025), designed to benefit from a possible post-election oil price surge.

2. Technical Overview

In analyzing the December 2025 WTI Crude Oil Futures (CLZ2025), a strong support level is identified. The 61.8% Fibonacci retracement level aligns perfectly with a UFO support zone at 55.62, suggesting a significant area where buying interest could emerge if prices fall to this level.

The current price of CLZ2025 is 67.80, and the technical analysis points to the possibility of a substantial bullish move following the 2024 US Presidential Election. The projected price increase of 40% could push crude oil prices up to 94.92 over the next year. However, even a more conservative target of 20% (around 81.36) could offer considerable upside potential.

This analysis provides the foundation for constructing an options strategy that not only takes advantage of the potential upside but also offers a buffer zone against downside risk by capitalizing on key support levels.

3. The Options Strategy

The options strategy we'll use here is a Breakout Booster Play designed to take advantage of the expected rise in crude oil prices. Here's how the strategy is constructed:

1. Sell 2 Puts at the 55 Strike:

• Expiring on November 17, 2025, these puts are sold to collect a premium of approximately 3.27 points per contract.
  
• By selling 2 puts, we collect a total of 6.54 points.
  
• This creates a buffer zone, allowing us to take on some downside risk while still profiting if prices remain above 55.
  

2. Buy 1 Call at the 71 Strike:

• Also expiring on November 17, 2025, the call is purchased for 6.28 points.
  
• This call gives us the potential for unlimited upside if crude oil prices rise above 71.
  

Net Cost: The net cost of this strategy is minimal, with the collected premium from the puts (6.54) offsetting most of the cost of the call (6.28). The result is a credit of 0.26 points, meaning the trader gets paid to enter this position.

Break-Even Points:

• The position would lose money only if crude oil falls below 54.87 (factoring in the premium collected).
  
• Profit potential becomes significant if crude oil rises above 71, with large gains expected if the projected move to 81.36 or 94.92 materializes.
  

This strategy effectively positions the trader to profit from an upward breakout while maintaining a buffer against downside risk. If crude oil drops, losses are limited unless it falls below 54.87, at which point the trader would be required to take delivery of 2 crude oil futures contracts (long).

4. Profit and Risk Analysis

Profit Potential:
The key advantage of this options strategy is its profit potential on the upside. If crude oil prices rise above 71, the purchased call will start gaining value significantly.

• If crude oil reaches 94.92 (a 40% increase from the current price), the long call will be deep in the money, resulting in substantial profits.
  
• Even if the price rises more conservatively to 81.36 (a 20% increase), the strategy still allows for meaningful gains as the call appreciates.
  

Since the net entry cost is essentially zero (with a small credit of 0.26 points), the potential profit is high, and it becomes especially powerful above 71, with unlimited upside.



Risk Management:
This strategy comes with a 19% buffer before any losses occur at expiration, as the break-even point is 54.87. However, it is important to note that if the trade is closed before expiration, losses could be realized if crude oil prices have dropped, even if the price is above 55.

• Risk Pre-Expiration: If crude oil prices fall sharply, especially before expiration, the trader could face significant losses. The risk is theoretically unlimited because, as the market moves against the sold puts, their value could rise dramatically. If a trader needs to close the position early, those puts could be worth significantly more than the premium initially collected, resulting in losses.
  
• Potential Margin Calls: If crude oil drops far enough, the trader may receive a margin call on the short puts. This could happen well before the price reaches 54.87, depending on the speed and size of the drop. If not managed properly, this could force the trader to close the position at a significant loss.
  

While there is a built-in buffer, this trade requires active monitoring, particularly if crude oil prices start to decline. Risk management techniques, such as stop-loss orders, rolling options, or hedging, should be considered to mitigate losses in case the market moves unexpectedly.

5. Contract Specs and Margins

WTI Crude Oil Futures (CL)

• Tick Size: The minimum price fluctuation is 0.01 per barrel.
  
• Tick Value: Each 0.01 movement equals $10 per contract.
  
• Margin Requirement: Approximately $6,100 per contract (subject to change based on market volatility).
  

Micro Crude Oil Futures (MCL)

• Tick Value: Each 0.01 movement equals $1 per contract.
  
• Margin Requirement: Approximately $610 per contract, offering a lower capital requirement for smaller positions.
  

Why Mention Both?
Traders with larger capital allocations may prefer using standard WTI Crude Oil futures contracts, given their greater exposure and tick value. However, for smaller or more conservative traders, Micro Crude Oil Futures (MCL) provide a more accessible way to enter the market while maintaining the same exposure ratios in a smaller size.

6. Summary and Conclusion

This options strategy provides a powerful way to capitalize on a potential post-election rally in crude oil prices, while offering downside protection. The combination of selling 2 puts at the 55 strike and buying 1 call at the 71 strike, all expiring on November 17, 2025, creates a structured approach to profit from a bullish breakout.

With current analysis based on machine learning suggesting a potential 40% increase in crude oil prices over the next year, the long call offers unlimited profit potential above 71. At the same time, the sale of the puts at the 55 strike gives the strategy a 19% buffer, with the break-even point at expiration being 54.87.

When charting futures, the data provided could be delayed. Traders working with the ticker symbols discussed in this idea may prefer to use CME Group real-time data plan on TradingView: tradingview.com/cme/ - This consideration is particularly important for shorter-term traders, whereas it may be less critical for those focused on longer-term trading strategies.

General Disclaimer:
The trade ideas presented herein are solely for illustrative purposes forming a part of a case study intended to demonstrate key principles in risk management within the context of the specific market scenarios discussed. These ideas are not to be interpreted as investment recommendations or financial advice. They do not endorse or promote any specific trading strategies, financial products, or services. The information provided is based on data believed to be reliable; however, its accuracy or completeness cannot be guaranteed. Trading in financial markets involves risks, including the potential loss of principal. Each individual should conduct their own research and consult with professional financial advisors before making any investment decisions. The author or publisher of this content bears no responsibility for any actions taken based on the information provided or for any resultant financial or other losses.