The Bull Run Of Oil And The Options Positioning

Oil has been on an incredible run in the last month. A series of things have led that rally, but most and foremost is the energy translation. Whether one agrees on it or not, the energy translation has created a supply shortage. 

As funding becomes harder for conventional oil, upstream producers have been incentivized to reduce capex and favor dividends. On top of that, we have had the Ukrainian crisis and OPEC+ cutting production. 

Today we will talk about oil's latest price action, to show that Friday's adjustment was getting set up. We had been talking about oil for a week or so, and had raised the fact that Oil was very stretched. 

In the next few weeks we will release our Options Screeners that will be able to help you better filter Stocks, ETFs and Indices based on the option chain data. Those will be the V1 version of our screeners. 

We will then go on and layer in momentum features to get confirmation of what we are seeing in the option chain. Eventually, we will also have macro inputs and AI. As usual, as we build we will create supporting material to help you understand it. The screeners will be at no additional cost for Premium Members.

Back to oil, the first thing we started to look at was the oil positioning, specifically we took this chart from Bloomberg where one could see how stretched money managers long/short funds were.

Source: X @MenthorQpro

Options Positioning On Oil

Menthor Q provides quantitative models to understand Options Positioning within different assets. When looking at Oil we can use the ETF USO USO.

A good way to screen for a stretched asset is to compare the 1D Exp Move against the Call Resistance Level. Generally the call resistance level works like a bounce level as calls get monetized and market makers close their length that helps them delta hedge. 

This pull back is not necessarily bearish, but more like a technical adjustment.

The importance Of CTAs For Oil

Next we compared what we were seeing on Bloomberg with our own models. We took the Brent CTAs. Here you can clearly see that we were very stretched. Remember CTAs add liquidity once certain price levels are triggered, they do not drive that movement. In our Bot we upload everyday all our CTA Models.

Source: Menthor Q Membership

Then we looked at some Technicals. While we rely mainly on option positioning, we like to layer in Technicals and Momentum analysis. For that we already have models ready to be released to our users. Those should be used for confirmation. More on that coming soon. 

As we could see from this chart, the RSI was extremely stretched.

Source: X @MenthorQpro

About the Publisher: Menthor Q is a leading TradeTech company that specializes in developing advanced quantitative models for active investors. The team is made of industry experts, and is dedicated to making the financial markets more accessible and understandable to active investors. Menthor Q's models leverage the power of Big Data and AI to offer actionable and operational models to retail investors. For more information about the publisher: https://www.menthorq.co/

Disclaimer: Menthor Q LLC is a Publisher. We are not registered as a broker-dealer or financial advisor. The information, services, and materials published are purely for informational and educational purposes. It's important to note that Menthor Q LLC does not provide personalized recommendations, and any information provided should not be considered as such.