Betting on geopolitical events is an odd task in Markets.
Without discussing the moral aspect (traders have to make money, or at least try to, no matter what), trading live events come with significant potential risk.
Participants build up anxiety, heavy positioning, and costly conviction ahead of uncertain outcomes – this is the War Risk Premium, and it is not a cheap one.
Sometimes it pays, as was observed during last Summer with the 12-Day War, which took WTI to $78.43 highs in a matter of a week.
However, many times, similarly to what happened already on a few occasions in the current rise, Oil may just shoot higher before giving up in exhaustion as nothing official happens.
Will prices tumble again? Who knows.
Tensions really are rising, and the military armada amassed in the Middle East is already higher than the one seen in 2003 before the Iraq War, so there is a basis for fear. The Trump Admin also sounded a bit more aggressive in their speeches yesterday. Let’s see how it plays out.
Being positioned is a good way to gain exposure to potential volatility; however, it remains very tricky. A good entry point is essential, and the most important thing is to make sure you respect your rules and risk to trade for longer.
