COM - Oil and gold continue to do well even in current conflict - Barclays
2023-10-17 11:58:50 ET
The supply of WTI Crude Oil ( CL1:COM ) and the trade of gold ( GLD ) as safe heaven continued to have a “remarkable” rally amid the Israel-Hamas war and Iran’s possible involvement.
Gold ( GLD ) had one of its biggest one-day rallies on Friday, up 3.4%
The greater demand for upside in gold and oil was shown in “a significant repricing in call wings as Oil ( WTI ) 1M OTM call vols have gone from trading under the ATM volatility a week ago to now trading at a premium,” according to Barclays’ Equity Research, published Tuesday.
However, there will be a greater risk for a broader risk-off the longer the Middle East conflict goes on, the report said. The key to oil markets is the reaction of Israel to the reports that Iran could be involved in the planning of the attack.
“Investors can hedge the risk of such a selloff via equity puts contingent on higher oil or dual digitals.”
Barclays recommended buying Dec. 23 dual digital for a nine-to-one payout, with the Euro Stoxx 50 ( SX5E ) less than 95%, and the United States Oil ETF ( USO ) greater than 103%.
In addition, Barclays said that investors who believe that a full escalation in the Middle East is unlikely to happen “can monetize on richer tails via call spread collars.”
“With tails now repriced higher in oil, investors can potentially fund short dated oil call spreads by selling puts,” the report said. “For instance, WTI Dec23 75/90/100 call spread collar can be entered at almost flat premium.”
More on Crude Oil Futures:
- What To Make Of The Current Geopolitical Situation (Israel) And Implications For Oil?
- Oil Rallies On Middle East Tension
- The Bullish Case For Oil Is Still Compelling
- Commodity Roundup: Gold up; oil markets eye U.S. -Venezuela deal
- Israel-Hamas war could push oil prices, inflation higher - Principal Financial Group
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Oil and gold continue to do well even in current conflict – Barclays