For 71 years, Baker Hughes has issued the rotary rig counts as a service to the petroleum industry. Hughes Tool Company began weekly counts of U.S. and Canadian drilling activity in 1944. Hughes initiated the monthly international rig count in 1975. The North American rig count is released weekly at noon central time on the last day of the work week.
Truthfully, BH rig counts were never much of a data point, especially U.S. rig counts. With the advent of technology improvements in horizontal drilling and the leap of the U.S. to number 2 in crude production, they have been watched more closely and have become a real price mover since the crude price decline which began in July of 2015. More importantly, this little gem of data has produced opportunity for CL traders. Nadex binary options offer a nifty little 1 PM central expiration that works really well in trading the reversal after the release. It’s very simple. Start watching the trend on CL an hour before the release. If you can, identify the daily trend. You would be looking to place a trade after the BH release, if the data sends CL in the opposite direction of the trend you’ve identified. You will be trading for a resumption of the daily trend. Choose a strike with a very uneven bid/ask that is in the direction of the trend, for example; if the trend is down and CL is trading at 43.50, target a sell of an option above the current price after the release. So in this example we may look for a sell of the >44.00 strike to go short. The bid/ask would be somewhere in the range of $77.50 – $22.50, meaning if you sold it at this point, you would be risking (paying) $77.50 to make $22.50 ($100 max payout – the $77.50 you paid to be short). In this example, if rig counts reductions come in come in weaker than expected, a short term rally tends to develop, but the oversupply of crude in the current environment is so pronounced, that rig count driven rallies tend to fail if the prevailing daily trend was down. After the short term rally, wait for the options you are watching to get above 1 to 1 reward to risk then sell the strike you have chosen.
The opposite tends to happen in an uptrend as well. It’s to your advantage as a trader that this data is released on a Friday. Speculators in the underlying commodity tend to cover position towards the end of the week in order to reduce weekend risk, especially the risk from OPEC announcements or actions. Pre-rig count moves are where most of this covering of positions takes place. So the trade is to fade a reversal of trend after the rig count release, in the Nadex binary 1 PM central time expiration. Attempting this trade in standard options or futures is much riskier because of quick, low liquidity spikes in either direction, but the controlled risk in binary options gives you comfort AGAIN. Fade the reversal of speculator covering and rig count moves, and end the week with some low risk high reward, instant gratification.