Trade Alert - (USO) September 16, 2019 - BUY
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline.
Trade Alert - (USO) - BUY
BUY the United States Oil Fund (USO) October 2019 $14 - $15 in-the-money vertical BEAR PUT spread at $0.87 up to $0.92
Opening Trade
9-16-2019
expiration date: October 18, 2019
Portfolio weighting: 10%
Number of Contracts = 114 contracts
The mass drone attack against Saudi Arabian oil production and refining has sent the price of Texas tea up $10 in one day, the largest such move in history. This is clearly the end result of the US unliterally pulling out of the US Iran Nuclear Agreement and the economic sanctions that followed, thus inviting retaliation.
Fortunately, I know this part of the world well. The damage done can be repaired quickly, and the 5 million barrels a day returned to the market. There is easily enough oil in the pipeline to cover it easily, some 27 days’ worth of supply.
This is happening in the face of a global oil glut which is worsening by the day as the world slides into recession. Therefore, I think the spike is temporary, no more than a few days or best. All we are really seeing here is epic forced short covering.
I am therefore buying the United States Oil Fund (USO) October 2019 $14 - $15 in-the-money vertical BEAR PUT spread at $0.87 or best
Don’t pay more than $0.92 or the risk/reward will go against you.
This is a bet that the United States Oil Fund (USO) will not trade above $14.00 by the October 18 option expiration day in 24 trading days. That would require the price of oil to rise by another 10.23% from the present level, from $60.34 to $67.76.
To do that, oil would have to rocket to a new one-year high in the next five weeks.
If you don’t do options, sell short a small amount of the (USO) for a trade.
Here are the specific trades you need to execute this position:
Buy 114 October 2019 (USO) $15 puts at…………...……$2.40
Sell short 114 October 2019 (USO) $14 puts at………….$1.53
Net Cost:………………………….……….........………….….....$0.87
Potential Profit: $1.00 - $0.87 = $0.13
(114 X 100 X $0.13) = $1,482 or 14.98% in 24 trading days.
To see how to enter this trade in your online platform, please look at the order ticket above, which I pulled off of Interactive Brokers.
If you are uncertain on how to execute an options spread, please watch my training video on How to Execute Vertical Call and Put Debit Spreads by clicking here.
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Please keep in mind that these are ballpark prices only. There is no telling how much the market can move by the time you get this.
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The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the market to come to you.
The difference between the bid and the offer on these deep in-the-money spread trades can be enormous.
Don't execute the legs individually or you will end up losing much of your profit. Spread pricing can be very volatile close to expiration.
If you don't get done, don't worry. There are another 250 Trade Alerts coming at you over the coming 12 months.