A Note for the Serious Investor:
The material that follows is written for high-net-worth and accredited investors who are serious about understanding the use of commodity options in a professionally managed portfolio. Futures and options involve substantial risk of loss, are not suitable for all investors, and only risk capital should be used. This article is for educational purposes only and is not a recommendation to buy, sell, or hold any specific futures contract, option, spread, or commodity position.
Crude oil prices have been whipsawing near the $90 to $100 level amid one of the most significant oil supply shocks in years.
While stocks have seen plenty of volatility of their own, crude oil prices have continued to command the spotlight. Crude has not only outperformed stock indexes but also most of its commodity brethren.
Why?
Largely the result of its own unique fundamentals amid the Iran conflict.
For option sellers, the impressive rally and heightened volatility have pushed distant option premiums higher. This right at the time when some of the underlying fundamentals driving the rally may be approaching a turning point.
If you’re looking for inflated premium to study this month, crude call premium could be your huckleberry. But to understand the potential opportunity, you must first understand what is and what likely will be driving prices.
What is Driving the Current Rally?
The core factors driving crude right now are twofold.
- Supply risk from the US-Iran conflict and Strait of Hormuz disruptions has tightened the market. The Strait of Hormuz remains one of the world’s most important energy chokepoints, and recent disruptions have caused traders to price in a meaningful risk premium.
- Seasonal summer demand is still in play, but inventory tightness has also been a major driver. The latest EIA data showed U.S. commercial crude oil inventories decreased by 7.9 million barrels for the week ending May 15, 2026, leaving inventories at 445.0 million barrels, about 2% below the five-year average for this time of year.
In selling options, it’s important to know what is driving prices now. However, it’s more important to know what is likely to direct prices in the next 6 to 9 months. This is how you identify trading opportunities. Let’s take a look at what is likely to play out in crude prices over that time frame.
Crude Oil Prices — What’s Next?
The risk premium has unquestionably pushed prices higher. But what happens from here?
The most likely path moving forward, especially if US-Iran talks progress toward a reopening of the Strait of Hormuz, may be one of stabilization or even a sharp pullback once flows begin moving more normally again. Markets are already reacting quickly to headlines. Reuters reported that Iranian state television described a possible framework under which Tehran could restore shipping through the Strait of Hormuz to pre-war levels within a month, though the report was not final and the U.S. denied it.
US producers remain a pesky rival. Domestic output has remained at or near all time levels, helping offset at least some of the Middle East disruptions. To this point U.S. production has had little impact to erase the risk premium, but it does give the market a counterweight if agreements are made and physical flows improve.
Which brings us to the bigger point.
Seasonal Tendency: A Headwind to Price Gains
As we discussed earlier, oil prices usually tend to strengthen during late winter and early spring. However, as summer approaches and supplies are deemed adequate to meet needs, refineries tend to scale back gasoline production, allowing crude inventories to build again. This cycle often results in crude prices starting to weaken as early as May, in a trend that can last through the summer.
In 2026, the seasonal story is complicated by the Strait of Hormuz crisis. Geopolitics can override seasonal tendencies in the short run, and oil markets can remain volatile when supply risk is unresolved. However, if shipping disruptions ease and refineries begin adjusting activity as the summer season matures, seasonal factors could become a stiff headwind to further gains in crude in the months ahead.
Our View
While the Strait of Hormuz disruption has been effective in pushing a significant risk premium into crude oil prices, markets do not move on one factor forever. The issue now is whether the conflict premium remains in place or begins to unwind.
On one hand, restricted flows through a critical oil chokepoint can help keep a floor under prices. On the other hand, progress toward a deal, stronger tanker traffic, robust U.S. production, or a seasonal easing in demand could all create headwinds to further gains, especially of an extreme nature.
Our internal view is that crude may have difficulty sustaining a runaway move higher if geopolitical tensions ease. Yet, on the option side, volatility has driven premiums to elevated levels. This is a situation that may be worth studying for qualified investors.
In the case of crude, balanced fundamentals and a recent surge in volatility may make it a useful situation for evaluating call premium above the market.
We’ve been evaluating call credit spreads in managed portfolios this month.
Remember, option sellers are NOT trying to predict exactly what prices will do, only identify a price level the market may be less likely to exceed within the life of the option. That does not make the strategy risk free. A renewed supply shock, further escalation, or another disruption in the Strait of Hormuz could push prices sharply higher. However, if the market is already pricing in a great deal of fear, distant crude call premiums may deserve a closer look.
Qualified investors can study such a strategy this month as a way to evaluate elevated crude oil option premiums in a market where you do not necessarily have to pick exact price direction. As for the availability of these distant strikes, we can all thank geopolitics for that.
Risk Disclosure: Trading futures and options on futures involves substantial risk of loss and is not suitable for all investors. Certain option-writing strategies, particularly uncovered positions, may involve substantial or potentially unlimited losses. Adverse market movements may also result in increased margin requirements and the need to deposit additional funds. OptionSpreaders.com primarily utilizes spread-based strategies intended to offset or limit certain risks, but spreads do not eliminate the possibility of substantial loss. Investors should carefully consider whether these strategies are appropriate in light of their financial condition, investment objectives and ability to bear risk. Past performance is not necessarily indicative of future results.
Justin Cardwell
Director of Research at OptionSpreaders.com
For more information on managed leveraged option selling accounts with OptionSpreaders.com, request a complimentary Investor Information Discovery Pack here or call 888-383-2779 to schedule a free consultation*. (*Qualified investors only. From outside the US call +1 813-999-0026.)
