All eyes are on the oil futures market today. As governments and industries across the globe adjust for drastically lower oil prices, investors are anxious to see how the crude market will react to the growing conflict in the Mid-East.

So far today, crude prices have jumped by near double-digit proportions, creating at least a temporary layer of support around the $40 per barrel level. As tensions increase along the Gaza Strip and Israel threatens with a strong and sustained ground attack, futures traders have all the ammunition they need to send prices higher… at least temporarily.

For fast-moving investors, the action has created a trading opportunity. Shares of the world’s largest oil producers opened higher thanks to a jump in crude prices. Exxon Mobil (NYSE:XOM) is up by just under two percent. Chevron (NYSE:CVX) and BP (NYSE:BP) are up by similar proportions.

A move of one or two percent may equate to hundreds of millions of dollars in increased shareholder equity, but for the average trader, it spells little in the way of profit opportunity. That is why smart investors will turn to index-based ETFs like Ultra Oil and Gas ProShares (NYSE:DIG). It is trading close to 4% higher today, giving investors the extra leverage they need for strong profits.

They fight, you win

If increased profits through leverage are what you are searching for, turn to the options market. Shares of the Oil and Gas ETF may be up by just a handful of points, but investors holding the ETF’s options are sitting on overnight gains of25% and more.

Although call options are jumping in value today, trading activity for puts remains strong. It is a signal that many investors believe today’s spike will be a temporary one. After all, conflict between Israelis and Palestinians is nothing new.

This is a conflict worth watching very closely. Thanks to a global recession, tensions are high. Oil-producing countries like Iran and Russia are desperate and would love to see a large-scale battle send prices higher. You can bet they will do all they can to nurture increased conflict and hostility.

If any foreign governments step foot into the region, be prepared for trouble in the oil market. That means hedge your portfolio against a strong turnaround in crude prices.

The best way to accomplish the goal is through the options I mentioned above. If you are sitting on sizeable profits, use a short-term collar position to protect your gains. If you are positioned to benefit from a further slide in crude prices, get your hands on some call options to hedge against a short-term jump in valuations.

The options market offers great opportunities for times like these. Take advantage of the situation and profit as the world’s governments fight for power.

Source:Mid-East fighting leads to trading opportunities