• Market:  May 2006 Crude Oil (CLK6)
• Tick value: 1 point = $10.00 
• Option Expiration: 04/17/06   
• Trade Description: Bull call butterfly spread
• Max Risk: $300.00
• Max Profit:  $2,200.00
• Risk/reward ratio 7:1

Buy one May Crude Oil 67.50 call, buy one May Crude Oil 72.50 call and sell two May Crude Oil 70.00 calls, on the same ticket, for a combined cost and risk of 30 points ($300.00) or less to open a position.

Technical/Fundamental Explanation
While the current domestic supply picture may be contraindicative for this trade, the relevance of that data has been questionable to say the least over the past few months. The real catalysts for this expected move to the upside is a market that has fallen too far too fast and found a bottom without breaking trend line support. When you couple that fact with the current geopolitical issues (Iran, Venezuela, Nigeria ad infinitum) then you have a strong case for another stab at the previous highs as we exit the winter and head into the driving season. This trade offers an inexpensive way to be involved in the energy markets while at the same time allowing for an attractive risk to reward ratio.

Profit Goal
Max profit assuming a 30($300) point fill is 220($2200) points and occurs with May crude expiring at $70. Break even points at expiration are 67.80 and 72.20. This means we have a 440 point range that Crude Oil can expire within that we will result in at least some kind of profit.

Risk Analysis
Max risk assuming a 30 point fill is 30 points ($300.00). This occurs at expiration with the Crude Oil trading below 67.50 or above 72.50.

Disclaimer
Past performance is not indicative of future results. Trading futures and options is not suitable for everyone. There is a substantial risk of loss in trading futures and options.

Matt Odom is the Managing Partner and Energy Analyst and Derek Frey is Head Trader at Odom & Frey Futures & Options.