Daniel P
09-13
At roughly $154.90, USO šŸ›¢ļø looks like a compelling tactical short on a mean-reversion view. The current price is near its 52-week high and appears to embed a large, conflict-driven supply and shipping-risk premium. If disrupted production and trade flows normalizeā€”as the base case expects during 2027ā€”the premium should unwind. Higher prices also encourage supply response while curbing demand, reinforcing the downside once scarcity fears ease.
ā€œnormalā€ USO reference is around $70, with a broad normal range of roughly $60ā€“80. $90ā€“100 remains elevated; $165ā€“170 is a disruption/shock regime.


Timeframe: base case expects most disrupted oil flows to normalize around Q2 2027


STRATāœØ: A synthetic short is a strategy you can consider in current scenario often results in a credit - allowing you to gain a premium if the target is reached closer to the expiration date while getting rid of the time decay. (Check image uploaded)


Give a like if you like this analysis please :)

Modified in.09-14
šŸŽ Write & Win | Higher for Longer: How Would You Invest?
If interest rates stay higher for longer, how would you adjust your investment strategy? Share your market take and investment ideas, publish original content for a chance to win Tiger Coins and exclusive prizes!
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

  • WayneEvans
    09-14
    WayneEvans
    2014 Crimea premium did not unwind that fast either. Betting on ā€œnormalā€ by Q2 2027 feels early when supply risk can stay sticky for years
    • Daniel P:Ā 
      My back testing - on similar events and how long it took for price to revert to mean
    • Daniel P:Ā 
      But I think it depends on assumptions, timeframe, exit strategy. For me $100/barrel seems to be at the high end of a trading range?


      But interested in your views, how are you playing it?
    • Daniel P:Ā 
      I did a quick check on Crimea event you mentioned price did plummet to $60~ in Dec 2014. But noted CL price was elevated in $85-$107 range from 2011-2014.


      But according to my backtesting the current senario is already: 23 weeks vs an 11.4-week average / 15-week median to fully cross the old mean
  • Daniel P
    09-14
    Daniel P
    2014 Crimea i did a quick check price plummeted to $60~ in December 2014. But before that Oil price did remain elevated at around range of $85-$107 for quite a period.


    But my backtesting already shows that the current situation is quite an outlier: 23 weeks versus an 11.4-week average / 15-week median to fully cross the old mean


    But of course there are assumptions made in this and depending on your profit targets and timeframe there is alot to consider. At $100+/barrel, i do think given a long enough timeframe this would be closer to the higher end of the trading range.


    But Iā€™m interested in what your thoughts are?
Leave a comment
5