The Intergalactic Cowboy

Crude oil was trading above 136 dollars a barrel earlier. The media is describing this as an oil squeeze. Let me explain what this means with the limited knowledge that I have on this subject.
There are investment vehicles called Put Options that an investor can purchase on the stock or stocks of his or her choice. A put option allows you to sell a stock at a high price of your choice regardless of how low the price of the stock goes. Put Options pay off when the stock in question goes way down in price. When this happens, the investor can buy the stock at the current low price and immediately sell the stock at the high price that his option is valued at. So, investors buy Put Options on stocks that they expect to go down in price. When the stock unexpectedly goes up in price, the investor has to quickly sell his option for only a small amount of profit. This maneuver is referred to as a “squeeze.” If he waits too long, say five minutes, he can lose money on his option, because the price of the stock is higher than his option allows him to sell it at. If he waits even longer, say several hours, he can lose thousands of dollars by the time he sells his option !
It is also possible in the investment world to purchase Crude Oil Futures. In simple terms, you buy a quantity of crude oil at a certain price and sell it at another price. Since the media is referring to today’s price increase as an oil squeeze, I must surmise that it is possible to purchase Put Options on oil futures contracts and that investors are purchasing oil and selling oil options before they lose thousands of dollars. ( I could be mistaken about this.) Certain members of the media have been proclaiming lately that the price of oil will go down to 100 dollars a barrel, encouraging speculators to place their “put option bets” on this gamble. Today, however, the dollar dropped in value; an Isreali government official threatened to bomb Iran’s nuclear reactors; and a couple of investment banks suggested that oil will reach 150 dollars a barrel by July 4th ! This increased the price of oil a little bit this morning, causing a panic situation among the oil investors. They started purchasing oil futures like crazy to minimize their option related losses, driving up the price astronomically.
Some of these oil investors are mutual funds and hedge funds, which have millions of dollars to invest in any investment they choose. After the New York Mercantile Exchange closes in the afternoon, these hedge/mutual funds can further run up the price of oil in the International Commodity Exchange which, I believe, operates twenty four hours a day, Monday through Friday. Congress is working on a new law to prevent these funds from buying and selling on the ICE. Until this new law is passed, the little guy has to go along for the ride, whether he is an investor or a gasoline user. I should add that these increased fuel costs, increase the transportation costs of delivering the other commodities such as corn, wheat, and other edible foods. The increased transportation costs are added to the final supermarket price of the food. I wonder if the oil price has gone up since I have been typing this ?
Feeling the squeeze,
I.C.