March Crude Oil is up $2.35 per barrel at $81.46 this morning as I write as the US dollar drops in value sharply.  The enclosed chart shows that the overall trend in crude oil remains to the upside.  The chart also shows that today’s rally so far is just returning prices back towards the upper end of the trading range that has existed in crude oil for the past month.  That trading range is defined on the March chart between about $78.00 to $84.00.  Until prices close outside of that range, all these sharp rallies and selloff’s are just noise.  I have to admit that emotions seem to be getting higher.

For today, I recommend attempting to buy one March Crude Oil ($107 strike) call option and sell 2 March Crude Oil ($115 strike) call options at an overall credit of 20 cents or $200 gross.  If filled and prices never reach the $107 area in 86 days, then the options will expire worthless and we will keep the $200.  The maximum possible gain would be if March Crude closes right at $115 in 86 days, and that profit would be about $8000, the difference between the strike prices.  The risk would be if March Crude oil prices reach up to and beyond the $115 area well before the expiration date.  As prices approach the $115 area, we would need to exit the trade, hopefully with a profit.  The erosion of time as prices approach the $115 area would be good for us.

 Followers of this letter should have the following positions:

 Followers should also be long one March Crude Oil ($62.00 strike) put option from $1.51.

Short 2 March Crude Oil ($57.00 strike) put options from 83 cents each.

 March Crude Oil options expire in 86 days.

 David Hall

 The information  and opinions contained herein comes from sources believed to be reliable, but are not guaranteed as to accuracy or completeness. The risk of loss in trading futures and/or options can be substantial. Each investor must consider whether this is a suitable investment. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not  necessarily indicative of future results.