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Posted October 20, 2025 at 12:49 pm
Energy prices have been tumbling, a result of sluggish economic data from the world’s largest importer, China, and abundant supplies. Indeed, crude oil and gasoline futures are down approximately 5.2% and 4% from Oct. 13 to today, and those costs are heavily correlated to retail charges, although they could vary at times. Meanwhile, a 2% weekly decline in average gasoline prices from the prior print’s $3.061 would land tomorrow morning’s figure at $2.9988 and deliver a win to “Team No” at $3.00. I find the risk-reward of the “No” at $3.00 attractive in consideration of the fundamentals of the last few days and it costs just $0.16. Additionally, the “No” at $3.10 is also undervalued at $0.95, in my opinion.
Tomorrow’s Consumer Price Index (CPI) for Canada is expected to accelerate from 1.9% to 2.3%. Meanwhile, results from the monthly Reuters poll consisting of 16 forecasters for September range from a low of 2% to a high of 2.4%. But this volatile indicator carries an elevated deviation rate, meaning that it has a higher likelihood than normal of arriving well ahead or way below estimates. In consideration of the projections and its historical tendencies, I find a short strangle kind of trade attractive for the upcoming publication. Indeed, the “Yeses” at 1.5% and 1.7% and the “No” at 2.5% appear undervalued to me. The thresholds are going for $0.96, $0.90 and $0.94 and the combo would require a beat of +0.3% or a miss of -0.6% to lose money.
Source for images: ForecastEx
Note: Prices are highest bids as of the morning of Oct. 20, 2025. Red circles around the thresholds were inserted by J. Torres to highlight his preferred “Yes” and “No” answers throughout different levels.
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Never done a put or call. 🙂 (Because it’s too risky.) This article seems right on target to me even though I’m not an oil expert.