Crude Oil Iron Condor Strategy — Full Breakdown & Transcript

[00:01] of a war? This is Five Minute Futures sponsored by CME Group. Let's get into this week's trade. This week's product is forward slash CL and it's specifically CLV6, the October expiration here. We're going to be

[00:14] condor right now. So, well, not necessarily selling crude. We're making an explosive trade to the upside right now. The idea here is to buy the 66 put

[00:26] and sell the 67 put, buy the 95 call, sell the 94 call, creating a short iron condor position. It is a defined risk range trade. Why are we doing this? Well, we're selling the 67 94 short strikes and buying the 65 95 wings for

[00:41] protection. The setup here is fairly straightforward right now. When we take a look at what's going on out at 48 days expiration, uh crude's been through a geopolitical shock, as it were, and there's been a big repricing of supply

[00:53] of the curve, particularly in the front month contract, which the V6 is not right now. So, the trade is about whether or not the market can continue If there is another supply disruption, it should be reflected in the U6

[01:08] contract first. The V6 would be a little bit less sensitive here. So, the 67 sits below recent swing lows, while the 94 short strike sits above the market, above recent highs that we've seen here in the CLV6 contract. Uh if there is any

[01:23] supply pressure, demand worries, jawboning from Iran, from the United States, we can absorb a little bit of that volatility in the movement here. So, we're not trying to pinpoint this thing at its current price of $81.63

[01:36] stay within a an overall range of where it's been trading for the past few months. So, let's talk about this cost map here. CL is a 1,000 barrel contract. $1 move is worth $1,000. A 1 cent tick is worth 10 bucks. So, both sides of

[01:50] this condor are $1 wide. Each side has about 1,000 of spread width. So, since only one side can be fully challenged at any given time, the max risk is $100 minus the credit received. So, if the condor is sold for 30 cents total, and

[02:04] that's $300 in credit and $700 in max risk before fees and slippage, it's sold for 35 cents. And that 350 in credit is against $650 in max loss. The break evens here are pretty clean right now. We take the short put strike and the

[02:18] call strike and add the credit. And if the total credit is 30 cents, the lower break even is about 6670, and the upper break even is about 9430. Uh the max profit happens if CLV6 settles directly between 67 and 94 at expiration, and the

[02:32] max loss happens below 65 or above 95. So, the middle is where this trade lives. There still may be a war going on, but it's going to ebb and flow, and the market may be sitting around the equilibrium point as it was back in May.

[02:46] What's the management condition here? We're not waiting for expiration. At 48 days to expiration, this is what we call a typical tasty day trade. 45 in, 21 out. So, at 48 days in, we're going to hold this for a few weeks, maybe 3

[02:59] weeks, 4 weeks, and then we'll revisit thereafter. But if we get to 50% max profit on the trade, right? If it's sold for 30 cents and decays for 15, we take look around and hope to go to max profit. There are other opportunities

[03:13] So, for me, this trade is fairly straightforward. Crude oil offers traders a fairly straightforward liquid way of expressing their views in the energy market right now. As long as the market stays above 67 or below 94, this

[03:28] thing is going to turn into a profitable trade. Ideally, it sits at the midpoint trade. Ideally, it sits at the midpoint directly between 67 and 94. So, when the in the middle of the war?" You say, "Yes." But you do it through selling the

[03:41] shocks typically don't stay around for long. And more importantly, you stay away from that front month contract.