While the shale revolution has President Donald Trump not only declaring our future energy independence, he is also declaring a new era of energy dominance. The reason is shale oil, along with other breakthroughs in technology. Now that the government won’t get in the way, we must access the best way to get there.
In options trading, a straddle is literally a sit-on-the-fence strategy. By purchasing a put and a call at the same strike (price of underlying commodity) for the same time period, an investor isn’t making a conventional directional bet; rather the investor is looking for a big move either up or down. The rub is that the big move must be greater than the sum of the two option premia or the bet goes south. But that is in the nature of the trade.
A surprise increase in U.S. oil supply as reported by the American Petroleum Institute as well as a report on increased shale oil production from the International Energy Agency has the oil market acting loopy. The IEA predicted that oil supply would outstrip demand next year, with output increases from U.S. shale producers.
According to the U.S. Energy Information Administration (EIA), U.S. oil output is likely to rise for the seventh straight month to a record 5.48 million barrels per day in July. This would take another bite out of the OPEC’s market share, with the cartel having set a self-imposed production cap.