Betting on Rising Oil With Options

I will be watching the crude oil market very closely for an opportunity to go long should the market pierce previous resistance around the $80 level. Crude has been range bound for weeks, so one can also look to sell puts on the January futures contract as the market dips.

I recommend selling puts in the $68 to $70 range, collecting a minimum of $600 per position. This allows investors to remain in a profitable position even if crude oil does break out to upside and stays range bound.

If crude starts trading for more than $80 on a closing basis I would recommend long futures positions. The placement of stops would be dependent upon individual investors' risk tolerance.

Lastly, one could continue to play the range by selling puts and calls. On the call side I would recommend selling nothing lower than the $90 strike price in January for a premium of $700 or better. If these positions can be "legged" into, it puts an investor in a position where he or she can profit from an upward to sideways market.

Risk disclosure: Past performance is not indicative of future results. The risk of loss in futures trading is substantial and such investing is not suitable for all investors. An investor can lose more than the initial investment.

-- Written by Matt Zeman in Chicago.

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