A Futures Contract is a binding obligation to buy or sell a specific commodity at a set price on a future date. Our focus is the CL (Light Sweet Crude Oil) Futures contract, traded on the NYMEX. The contract unit is always 1,000 barrels. At the current price of $59.93 (as of Nov 2025), the contract has a Notional Value of $59,930. The smallest price move, or tick, is $0.01, which equals $10.00 per contract. This high contract value, managed with a relatively small performance bond (margin, e.g., $6,500), illustrates the market's extreme leverage.

Options grant the holder the right, but not the obligation. A Call is the right to buy the CL Future, and a Put is the right to sell it, both at a fixed Strike Price. The price paid for this right is the Premium. An option with a Strike of $60.00 is At-The-Money (ATM) at our current $59.93 price. An option with a Strike of $58.00 would be an In-The-Money (ITM) Call.

Option premium is composed of two forces: Intrinsic Value (how much the option is ITM) and Extrinsic (Time) Value. For the $58.00 Call at $59.93, the Intrinsic Value is $1.93. Any remaining premium is the Extrinsic Value, which decays daily (Theta). This decay is rapid in high-volatility commodity markets like CL.

Crucially, exercising a CL option results in the creation of a fully leveraged CL futures position—not a cash payment. If a $60.00 Put is exercised, the buyer receives a Short $60.00 CL Future. This is immediately exposed to the $59.93 market price.

Since the underlying CL is a physically-delivered contract, holding an unmanaged assigned position until expiration carries the significant, complex risk of having to make or take physical delivery of 1,000 barrels of crude oil. Therefore, closure of the futures contract (if assigned) before expiration is crucial.

Simple long options are speculative tools with defined risk. If you buy a $62.00 Call for a $1.50 premium (a $1,500 cost):

Selling options collects premium (credit) but creates unlimited risk. If you sell a $58.00 Put for a $1.20 premium:

CL options are vital for the energy industry. An oil producer, concerned about a price collapse, buys an out-of-the-money $55.00 Put to establish a floor price for their oil sales. Conversely, an airline, anticipating higher jet fuel costs, buys a $65.00 Call to set a price ceiling, effectively protecting their operating budget.

Oct 3rd we bought back the short put option at 0.09 ($90) and closed out the trade for a profit of $400.

On October 3rd, a trade was placed involving the December Crude Oil (CL) Futures contract. The trade was a short put option, specifically selling the $55 put option expiring on October 29th. The market price of crude oil at the time of the trade was $60.90. A premium of $490 per contract was collected for selling this option. The breakeven point for the trade is $54.50. The probability of this trade being profitable was approximately 89%.

This trade essentially acted as an insurance policy on the December Crude Oil Futures contract. By selling the put option, you guaranteed to buy the futures contract at $55 if the price dropped to that level or below. In exchange for providing this guarantee, you were paid a premium of $490 per contract.

The outcome of the trade on October 29th depends on the price of crude oil:

If the price of crude oil starts to fall, one possible risk management strategy is to roll out and down the options contract. This involves closing the current position and opening a new one with a lower strike price and a later expiration date. This strategy can help mitigate losses by giving the position more time and a lower breakeven point.

Vertical spreads reduce the open-ended risk of selling naked options. A Bear Put Spread (modestly bearish) involves buying a higher-strike put and selling a lower-strike put.

The Greeks are essential for managing exposure:

The CL market is event-driven. Prior to an OPEC meeting, Implied Volatility (IV) spikes (Vega) as uncertainty peaks, making options expensive. Once the modest news is announced and uncertainty is resolved, IV collapses (Vega).

Strategies like Straddles and Strangles are used to bet purely on the volatility of CL. Selling a Strangle collects premium and profits if CL stays within a range; buying one bets on a massive breakout move.

Mastering adjustments is the difference between a professional and a novice. Learn when to Roll a losing position (closing and reopening a new option) to buy more time (Theta) or adjust your strike to defer assignment risk.

The cardinal rule: Always liquidate (close) all short options before the Last Trading Day. Never allow an ITM short option to be assigned, as it converts into a highly leveraged futures position with open-ended risk and immediate margin requirements. This is the final line of defense against the dangers of the CL contract.

Essential account requirements, margin maintenance calls in futures, and why a well-capitalized account is mandatory for undefined risk strategies. A disciplined approach to position sizing is the only true defense against the inherent leverage of the CL contract.

This course has equipped you with the complete foundational knowledge, critical Greek analysis, and defined-risk strategies necessary to trade the leveraged, event-driven CL Futures Options market. You now understand how to calculate intrinsic value at $59.93, how to structure a limited-risk Bear Put Spread, and, most importantly, how the fundamental market forces of Delta and Vega drive profit and loss in the commodity world.

We invite you to schedule a free, 30-minute one-on-one mentoring session with an experienced futures options trader. We will:

Click here to schedule your free mentoring session today!