With the EIA report due out at 10:30 am ET tomorrow morning, this could be the week Oil finally gets above the $50 price point, or it could be the week that we finally see a deep retracement from this steep rise.
One way to trade Oil this week would be to look for a retracement of the current upward trend. Going from almost $27 to $49 is no small feat, and nothing goes up forever or down forever so there will always be retracements in any market.
Here we see a chart of the July Oil Futures contract as of 7:46 am ET this morning with the weekly Nadex binary options shown on the right axis. These binary options expire on Friday at 4:15 pm ET. There are a variety of ways to play both sides of the market when trading with binary options.
If you are bearish, depending on the volatility and trading range you anticipate this week, then you could sell a binary option above the market if you wanted a high probability trade that would result in higher risk vs. reward set-up. You could also sell a binary option below the current market if you were looking for a lower risk vs. reward set up resulting in risking less money than your maximum profit if the contract were to expire in-the-money.
The drawback of purchasing out-of-the-money binary options is that if the market stays relatively flat then your trade results in a loss. The advantage, of course, is that you are risking less for more maximum profit.
One the flip side, if you are bullish Oil this week then you could buy a binary option either below or above the current market depending on your expectation. There are almost 4 days of trading remaining until expiration for these binary options, and included in those 4 days is the inventory numbers tomorrow morning. There is substantial premium priced into these binary options right now, as there should be, with so much trading time left until expiration. As the week goes on this premium will dissipate, and a chunk of that premium will vanish after the EIA announcement.
When you’re scanning the commodity market for trade set-ups consider the Nadex exchange for your next trade. You can open a demo account and they will fund you with $25k of play money, and that’s the best way to test out any new trading methodology before investing real capital.