WTI Crude Oil Bull Put Spread: Trading Uncertainty with Imperfect Thesis

The recent technical signals in WTI Crude Oil futures present a mixed picture, leading to uncertainty about price direction. While some indicators support a bullish-to-sideways interpretation, others suggest a bearish formation. In this scenario, an options trader can structure their position to allow the original thesis to be imperfect.

The chart shows that price has formed a falling wedge and compressed inside a triangle before moving above it. However, the 13-, 21-, and 55-period simple moving averages are below the current market. This mixed picture raises questions about how high price might go or whether the bullish thesis can be wrong.

To address this uncertainty, an options structure can be used to change the problem from 'how high can crude oil go?' to 'how much can the original bullish thesis be wrong before the structure is challenged?' A bull put spread can be created by selling the 86 put and buying the 81 put. This structure receives a net credit of approximately $1,100 and has an expiration breakeven of around 84.90.

The maximum defined terminal risk for this spread is approximately $3,900, producing a reward-to-risk ratio of about 0.28:1. However, the target condition for this structure is not to reach a specific price target but rather to remain at or above the 86 short strike at expiration.