At the same time, the economic malaise that continues to plague the West is not going to go away anytime soon. This should keep a cap on the upside of crude prices for some time. One of the reasons to sell options is that you do not have to pick market direction. And as an option seller in crude oil, you do not. However, should the administration announce some new type of stimulus in September, we would view a crude oil rally back to the $90 level as a call selling opportunity. Strikes at the $130 to $140 per barrel level should offer an excellent premium to risk ratio.

Crude Oil Martket:

Should economic figures continue to disappoint in September, look at dips below the $80 level as opportunities for selling puts. The $55 strike looks like fertile ground to take premium but lower strikes could become available depending on the severity of the news. We advise going out to March contracts or beyond to take larger premiums (target over $500 per option).

Selling puts and calls in the same market is called a "Strangle" or a "Bracket" in option selling lingo. Times of increasing volatility are typically the best times for writing strangles. With the promise of more headlines out of Washington and Europe in September, strangle writers should welcome any price volatility that occurs.

James Cordier & Michael Gross
Contributing Writers, Liberty Trading Group/Optionsellers.com
Optionetics.com ~ Your Options Education Site

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