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)
Sell the United States Oil Fund (USO) December $32.50-$35 put spread at $1.44 or best
expiration date: 12-21-2012
Portfolio weighting: 5%
($5,000/100/$1.44) = 47 Contracts
Oil hid my initial downside target of $88/barrel and the (USO) touched $33, so I am going to take profits here on my short position in the United States Oil Fund (USO) December $32.50-$35 put spread at $1.44 or best. We caught the entire $6 drop in Texas Tea since the Friday $94.50 top. Take the money and run.
This hedge worked like a charm, generating a three day 35% profit on the spread we can use to offset losses in long positions in Apple (AAPL) and gold (GLD). I will look to put this trade back on in the next substantial oil rally.
Keep in mind that these are ball park prices at best. The best execution can be had by placing your offer for the spread 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:
Sell 47 December, 2012 (USO) $35 puts at………………....….$3.30
Buy to cover short 47 December, 2012 (USO) $32.50 puts at...$1.86
Profit: $1.44 - $1.07 - $0.37
($0.37 X 100 X 47) = $1,739, or 1.74% for the notional $100,000 model portfolio.
Suddenly, Oil is Not Looking So Hot!