Long-dated oil contracts and volatility selling
The speakers argued that long-dated oil futures and selling high implied volatility options offer attractive risk-reward due to structural restocking demands and mispriced volatility.
The argument
Quinn argued that global strategic reserves are depleted and countries will restock above historical levels for national security, creating a structural floor for oil. Tyler and Quinn agreed that with implied volatility in the 90th percentile, investors should act as net sellers of options (e.g., selling long-dated puts) to monetize the expensive insurance premium.
The thesis, stress-tested
✓ What validates it
- ✓December oil futures yield carry remains high
- ✓US strategic petroleum reserves continue to decline below critical thresholds
▸ Risks discussed
- ▸Ceasefire or resolution in the Middle East could crush oil volatility and prices
- ▸US administration actions to artificially depress oil prices before midterms
Hear it yourself
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