Every Wednesday, Crude Oil inventory reports are released at 10:30am EST. Quite often, the actual inventory reports greatly misses the forecast projections from the analysts. When that happens, there can be wild swings in the price of crude oil.
Nadex provides binary options and spreads on crude oil futures. With binary options, you are making a decision about the likely direction of the market from a strike price within a defined time period. In today's trade, the 9am-11am EST time period was selected to coincide with the release of the crude oil report.
The crude oil market chopped sideways going into the release of the 10:30. With the market chopping around 50.81, 2 out-of-the-money (OTM) orders were placed at 10:25:
- BUY at >51.41: Risk $19.50, Reward $80.50 (1 contract)
- SELL at >50.41: Risk $20, Reward $80
At 10:30 the reports missed badly, and the crude oil market dove. The first move was to exit out of the BUY order for an $18.00 loss. The SELL looked good until the market retraced upwards almost 50 percent. This is quite common with crude oil. It reacts sharply, then retraces about 50 percent. Once the market continued its downward path, another order was placed at 10:45:
- SELL at >50.81: Risk $76.50, Reward $23.50 (5 contracts)
With 15 minutes left in the trade, the market ground downward settling at 50.19 at 11am EST. Here's a breakdown of how the 3 trades settled:
- BUY at >51.41 (1 contract) $18.90 net loss (after exchange fees were deducted)
- SELL at >50.41 (1 contract) $78.20 net profit (after exchange fees were deducted)
- SELL at >50.81 (5 contracts) $108.50 net profit (after exchange fees were deducted)
- Total Profit after exchange fees: $167.80
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The Trading Pub Team