Oil rose to a six-month high above $66 per barrel on Friday, marking its largest monthly percentage gain in more than a decade, after new data suggested the economic downturn may be easing.
But if you think crude is marching higher, think again. Option investors are betting that it doesn't!
It seems like there’s not huge conviction in the way oil is moving, says Brian Stutland of Stutland Equities. Yes it’s moving higher but it’s not gapping higher.
Typically when oil moves higher people start to feel it in their pocketbook and fear creeps back into the market. But take a look at the Vix, it continues to fall. There's not a huge increase in volatility in the market nor is there an increase in volatility in oil.
That tells me -- options traders are betting that the next move in oil is either sideways or even lower. I think the run in oil is probably out of steam.
However it's worth noting not everyone agrees. On Fast Money's Halftime Report Dan Fitzpatrick of StockMarketMentor said patterns in the chart suggest oil goes higher -- to $75.
And Joe Terranova, arguably one of the most optimistic people on the planet, expects oil to climb merely on momentum. I understand that the fundamentals for oil are horrible but you’ve got to trade the momentum, he says.