Next year that could boost oil prices to $150 a barrel or push them to $50 a barrel.

Fat-tail fears catch oil traders between $50 and $150 bets

Investors and traders are buying large numbers of oil contracts that would profit from a price super-spike – and a collapse.

In a rare and deep split of views, investors and traders are pricing in unusually large “fat tail” risks – low-probability events that have an outsize impact on prices – for next year that could boost oil prices to $150 a barrel or push them to $50 a barrel.

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“We face a bifurcated market: a crisis in the Middle East could send prices through the roof; the eurozone debt problems could trigger a collapse,” Seth Kleinman, head of energy strategy at Citigroup, said echoing a widely held view in the market.

The fear of abnormally large “fat tail” risks has driven investors to buy insurance through options – contracts that give holders the right to buy or sell crude oil at a predetermined price and date.

“Everyone I speak to on crude oil, if they have a directional bet they do it through out-of-the-money options,” said Fabio Cortes, a commodities fund-of-funds manager at Oakley Capital. “It’s like a lottery ticket.”