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Options Bets on $150 Oil

Written By Brianna Panzica

Posted December 9, 2011

Options traders are betting on $150 oil within the year.

The price seems to be looming in the near future as tensions with Iran remain high and the U.S. and E.U. struggle with the decision of how best to deal with the situation.

As the Financial Post reports, options markets have been buzzing with calls to purchase oil at $150 in December 2012. 

It’s become the most popular option on the New York Mercantile Exchange, jumping 9.2% since the U.N. report on Iran’s nuclear program was made public on November 8.

And the article reports that contracts are now up to about 38 million barrels.

Options to buy oil for $150 in December 2012 were at 38,023, and following behind were 35,453 options to sell oil for $80 in that same month.  Seth M. Kleinman or Citigroup in London commented to the Financial Post:

“The rise in open interest in deep out-of-the-money calls reflects investors looking to either profit from an oil price spike or to protect the rest of their portfolio if things do take a turn for the worse.”

Iran officials have warned that if serious sanctions were imposed, oil could hit $250 per barrel.

And so nations are reluctant to impose these sanctions.  According to the article, the U.S. Senate unanimously voted on financial sanctions against Iran, yet the presidential administration vetoed the plan out of fear of increasing the price of oil.

And Europe is reluctant to place a ban on Iranian oil as well.  The OPEC nation produced 3.56 million barrels a day last month.  World energy supplies rely on their exports.

The article reports that the European Union receives 3% of its oil needs from Iran.  Turkey receives 50%, China and India get 11%, and Japan receives 10% of its needs.

The EU and U.S. are trying to find an ally in China, hoping that enough sanctions could drain Iranian finances and shut down the nuclear program.

That’s all for now,


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