Sold USO August 33 Naked Puts

After letting my SLB shares get called away with my July covered calls I wanted to get some more oil exposure so I came back to more direct play with the oil ETF USO. USO doesn’t trade dollar for dollar with oil, but has been closer lately (on a percentage basis) than it was only a few months ago. It also has very liquid options, so I won’t have trouble getting out if I decide to later.

While USO was trading at $34.88 I sold to open three August 33 naked puts (UBOTG) at $1.05 each and received $302.75 after commissions. I sold out of the money to give myself a little cushion on my pick. I charted USO this morning premarket and think I could’ve gone for the August 34 strike, but didn’t want to push my luck. I don’t think USO will be back down to test its July intraday lows around $31.50 before August expiration. If I’m wrong (which I’m prone to be with USO sometimes) I can manage my way back out of it for an overall profit by selling new calls. At these prices for USO, I think the upside potential outweighs the downside risk. That was really the final determining factor in my decision to make a trade on USO again.

More on this topic (What's this?)

Which One is Better: USO, USL, UGA, UNG? (Shocked Investor, 1/12/10)

Profit From Where Oil and USO are Headed (Shocked Investor, 12/4/09)

Oil Bounce: United States Oil Fund (NYSE:USO), Exxon Mobile (NYSE:XOM) (Jutia Group, 1/27/10)

Negative Bias Issued: United States Oil Fund (NYSE:USO) (Jutia Group, 1/7/10)

Read more on United States Oil Fund at Wikinvest

Comments (2)

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2 Comments

Comment by Trading Humor

It seems to me to be the perfect time to be long oil. I think this recession is going to be a long one, and not ending soon as many hope, and I see no longer term bull market getting going anytime soon in stocks in general. But I think some commodities will have some good bull runs – as long as they are for products we have to use like oil or food. where demand is relatively inelastic. I am liking longer term 6 months, a year, ++ calls on USO.
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David
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[...] sold USO August 33 naked puts at the beginning of last week. I had a limit order in to buy to close if the option premiums [...]

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