Oil investors are buying options that will pay out if crude oil rises above $100 a barrel over the next four years. During the past month, investors have bought call options for WTI for late 2018, 2019 and 2020 at strike prices of $80-$110 a barrel, according to data from the New York Mercantile Exchange. Thus, in case oil rises above these price levels, the holders of the contracts will get their profit.
An owner of the call option can buy the asset i.e. WTI crude futures at a predetermined price (strike price) and within a specified period. In case the asset’s value is above the contract’s price, an investor can earn on this difference.
As of June 9th, investors bought 4,057 call options (equivalent to 4 million barrels) at $100 a barrel for December 2018. The number of opened options at $125 was 10,000. Meanwhile, there were 302 options at $91 a barrel for December 2020 and 128 positions that will pay out in case oil price rises above $100 a barrel.
