Cordier to TD Ameritrade: “A Great Time to Sell Volatility in Oil”
Ben : Let’s bring out our next guest to help us answer that question. Traders, we’ve got James Cordier, the President and Founder of OptionSellers.com, with us this morning. James, welcome to the show and we’ve got the Brent and the WTI, which have come off the highs from earlier this month. I have to remind myself that each and every pullback this year has been bought up as a strong economy and production concerns persist. I wonder, once again, we’ve pulled back about $5 off the highs, James, has anything changed?
James : Good morning, Ben. We are looking at a change coming up. We have a seasonal downturn in demand in the largest consumer in the world, that being the United States. At the same time, we have a softening global economy. Countries like Japan and India certainly really feel the pain when oil prices are heading up towards 85 on Brent and 75 on WTI. The fact that we have taken Iran completely out of the market, the fact that we have the ability to produce those barrels and replace Iran right now is really speaking large to the idea that once Iranian situation does create a more friendly, positive production level for global oil. I think a lot of people looking forward to that and if in fact that happens while economic growth worldwide slows, we’re probably going to ease lower from the levels that we saw just a month ago and possibly go below 70.
Ben : So, last time you were on, James, as far as I remember, you had actually recommended selling some call selling strategies. I imagine if you’re still somewhat bearish oil you’d still feel the same way.
James : What’s interesting, Ben, with all the volatility in all the markets, the DOW Jones and S&P recently and all the uncertainty over crude oil, the ability to sell those call options is still there. We think that later this year and the beginning of next year, we’re going to see crude oil with a six handle and we’re looking at selling, if you want to go to spring or summer of next year, you can sell the $90 call or the $95 call. If you’re willing to be a little bit more patient you can sell a little bit further out and sell the $100 call. So, selling options is just the opposite, of course, of buying them, trying to predict where the market is going to go. When selling options, you’re predicting where it’s not going to go and we do not think crude oil next spring or summer is going to be anywhere near $95 or $100. I know a lot of people are talking about $100 oil but Saudi Arabia has new all-time highs for production, Russia has new all-time highs for production, and the United States as well. We have a slowing global economy. That does not sound like $100 oil to me.
Ben : How about volatility in the oil market? You mentioned volatility in the indexes. With all the uncertainty related to spare capacity and some of the unknowns in terms of Iranian sanctions, which is set to take affect early next month, is the volatility that we’ve been seeing here to stay?
James : It is. Until we get to late December of this year/January of next year and we start having $0.50 daily moves instead of $1 or $1.50 daily moves, the volatility will start coming out. Right now it’s near highs for the year and I think that is a great time to sell volatility in oil. So many people are trying to decide whether to go short or whether to go long or just think that it’s in a trading sideways market right now. The beauty of selling options is if you miss the top that we saw two weeks ago you can still get short from $90 or $95 and we think that later this year that’s going to be kind of a layup.
Ben : Good point. Speaking of last week, we saw a couple of things. One was inventories, which were sharply higher. I also noticed on Friday rig count was way up. I’m wondering, James, if some of the infrastructure constraints that we’d been hearing about earlier this year if they’ve been resolved.
James : They’re starting to be. The fact with selling $70 and $75 oil and locking that in, you can imagine that a lot of money is going towards infrastructure. In Texas, you’re producing oil for $45-$50 a barrel and you can lock in $75 sales for as far out as the eye can see. That is a great bottom line for a lot of investors and I think that’s what we’re going to see in the next 3-6 months as a lot more oil flowing out of places like Texas. At a time when we’re in shoulder season right now going into the United States, we’re after driving season, we’re before heating season, and with a slowing global economy I think locking in $75 oil for producers is going to look very attractive. We’re going to probably see in 2019 12 million barrels produced each day in the United States. Once again, that spells $65 and $67 oil, we think, going forward.
Ben : You know, I’m curious how that’s all going to factor into to the U.S. becoming less energy dependent. As production here continues to increase I’d imagine we’re somewhat limited in terms of our ability to rid the world of its energy concerns because a significant amount of oil demand, I should say, at least for oil, comes from obviously the Brent, the higher sulfuric content blend. James, let’s face it, not matter how energy dependent we become, OPEC is going to be around for a long time, correct?
James : Certainly so. OPEC produces oil that goes worldwide, nearly $85 recently and now down to $80. As soon as we start seeing fewer barrels being needed next year and the IDA says that we’re going to be needing 150-200,000 barrels less next year, we could see a potential mini-glut here in the United States in the next 12-18 months. As all this ramping up in production leads to less oil needed around the world, and if we have a slowdown in global economies next year we’re not going to need to export that oil and then all of a sudden we have oil supplies in the United States well above the 5-year average and, once again, that doesn’t spell $90 or $95 oil to us.
Ben : Alright James, we’re going to let you get out of here. Really appreciate you coming on. It’s fascinating for me to talk oil because no matter who you talk to you get a difference of opinion and with all the contributing fundamental activity right now it’s quite the stir, not only in price activity but also in terms of discussion. James Cordier, the President and Founder of OptionSellers.com. We look forward to having you back in the near future.
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A sampling of various appearances, interviews and articles can be found below.
TD Ameritrade – September 13, 2018
TD Ameritrade – July 31, 2018
TD Ameritrade – June 26, 2018
TD Ameritrade – May 23, 2018
CNBC – August 29, 2017
Fox Business – August 30, 2017
CNBC – November 18, 2016
CNBC – July 6, 2016
CNBC – June 8, 2016
CNBC – May 16, 2016
CNBC – December 28, 2015
CNBC – September 24, 2015
CNBC – August 19, 2015
FOX Business – May 12, 2015
CNBC – NOV 13, 2014
BNN – NOV 11, 2014
The Street – NOV 11, 2014
Fox Business – SEP 22, 2014SEE MORE
Investing.com – SEP 20, 2018
Investing.com – SEP 06, 2018
Investing.com – AUG 09, 2018
Prospect News – JUL 19, 2018
CNBC – MAY 22, 2018
CNBC – MAR 15, 2018
CNBC – JUN 30, 2017
Bloomberg – JUN 21, 2017
Bloomberg Markets – MAY 05, 2017
Bloomberg Markets – MAY 05, 2017
KITCO News – AUG 18, 2015
TD Ameritrade – MAR 05, 2015
Traders.com | Stocks & Commodities Mag – FEB 2015
Trader Planet – JUN 05, 2015
Trader Planet – JUN 01, 2015
MarketWatch – MAY 29, 2015
MarketWatch – MAY 15, 2015
Trader Planet – MAY 01, 2015
MarketWatch – APR 29, 2015
Seeking Alpha – APR 28, 2015READ MORE
August 25, 2017
March 02, 2016
DEC 05, 2014
DEC 05, 2014
NOV 11, 2014