Trade Alert – (USO) November 20, 2012

As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price.

Trade Alert - (USO)

Buy the United States Oil Fund (USO) January, 2013 $29-$32 bear put spread at $0.93 or best

Opening Trade


expiration date: 1-15-2013

Portfolio weighting: 5%

($5,000/100/$0.93) = 54 Contracts

With missiles raining down on Israel, we have been given another nice $6 spike in oil to sell into. It is amazing that this is all the oil markets could eak out, and that it didn’t go higher. As long as this remains an air war, which will end shortly, I expect Texas tea to stall around here. US Secretary of State is on Air Force One on her way to the Middle East as I write this.

If there is no ground war prompted by an Israeli invasion of Gaza, we could revisit the $84 low in oil we saw a few weeks ago, and the $31 low in the (USO).

The world is still producing oil faster than it can consumer it. The increase in US production this year alone is enough to more than offset the increase in demand for the entire rest of the world. This is terrible news for oil prices.

Keep in mind that these are ballpark prices at best. The best execution can be had by placing your bid in the middle market and waiting for the market to come to you. The difference between the bid and the offer on these spread trades can be enormous. Don’t buy the legs individually or you will end up losing much of your profit up front. If you don’t get filled, then just wait for the next Trade Alert. The will be many fish in the sea. To execute this trade:

Buy 54 January, 2013 (USO) $32 puts at………..….$1.36
Sell short 54 January, 2013 (USO) $29 puts at...$0.43
Net Cost:…………………………………………..…...$0.93

Maximum Profit at expiration: $3.00 - $0.93 = $2.07

($2.07 X 100 X 54) = $11,178, or 11.18% for the notional $100,000 model portfolio.

Taking Another Trip to the Well!