- SCO is an ideal way to short oil as it trades 2x inverse with WTI futures. Global growth is downshifting while OPEC+ is ramping production.
- Call options on Bank of America provide a hedge if oil does not decline, as this scenario would involve higher US yields - supportive of net interest margins.
- BAC is a bet on a stronger US economy and increased US loan demand.
- There is potential for both trades, SCO and BAC, to succeed as well as the bond hedge works in reverse with higher yields contributing to a decline in risk assets.
- Higher US yields/a stronger USD and the resulting negative effect on Emerging market oil demand could contribute to a decline in WTI futures allowing both trades to profit.
For further details see:
Long SCO With A BAC Call Option Hedge Is A Tactical Pair Trade