Analysis of the WTI options market and the influence on WTI pricing

[Gary LeBlanc + 50]

Feb 1 2020

  As of the close on Jan 31 2020 the WTI options market is heavily weighted towards the puts side of equilibrium. With $1.366 billion in put premiums in the March contract as compared to only $397 million it gives a Put/Call Premium Ratio of 3.44. 1.0 is "equilibrium". The "imbalance" in the options pool is $1.366B - .397 = $969 million dollars. That is an opportunity for the market makers to take advantage of by "rallying" the price of WTI. By rallying the price of WTI the "$1.366B" will start to shrink as put holders exit. Bearish for the price of the put options themselves. Before WTI can "rally" however, it will need to establish a base for 7-10 trading days at least. My definition of "building a base" is for WTI to trade in a sideways pattern. Friday's high was $53.36. Until the daily low exceeds 53.36 that is considered base building. This erodes the value of both the puts and calls. 

[Zhong Lu + 845]

Yes.