Question
You work as a salesperson on the commodities desk of a major investment bank. The banks weather analysts predict a balmy, warm winter ahead. Assuming
You work as a salesperson on the commodities desk of a major investment bank. The banks weather analysts predict a balmy, warm winter ahead. Assuming you believe them, what trade would you recommend to your clients (hoping that they do well and continue being your clients for a long time)
a. You should recommend buying January delivery Heating Oil contracts, which are sure to increase in price if our analysts are right.
b. You should recommend selling January delivery Heating Oil contracts, which are sure to decrease in price if our analysts are right.
c. You should recommend buying January delivery Crude Oil contracts, which are sure to increase in price if our analysts are right, and they correlate greatly with electricity prices.
d. You should recommend selling both Calls AND Puts on the January Heating Oil contract (Straddles), as the Volatility probably will go up.
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