I saw the morning news of new jobless claims that came out lower than expected and turned into a big bull for about an hour and 10 minutes this morning. That was enough time to consider changing my position on SLB and opening new positions on USO and SSO. I watched the futures take off and read that Goldman Sachs gave oil an $85 target. I was ready to trade and put a lot on the line and then the markets opened.
I started by planning to sell naked puts on those three I mentioned above and then wised up and started eyeing the vertical put spreads. I kept watching and saw weakness starting to mount, so I stopped my plans for adding any new positions and decided to just sit back and continue to wait.
Here’s how my account looks this morning. I have $79,241.56 in cash. I added $3,000 that hit my account on Wednesday and I moved $66,523.56 into a money market yesterday with TD Ameritrade’s “cash sweep vehicle”. It only has an APY of 0.40%, but even at that low rate I’m making something more than nothing. I only have short option positions right now.
Quantity Description
-1 MON Jun 75 Put
-1 MON Jun 85 Call
-1 MON Jun 85 Put
-6 NDAQ Jun 17.5 Put
-6 NVDA Jun 9 Put
-2 SLB Jun 45 Put
-2 SLB Jun 55 Call
-2 SLB Jun 55 Put
-4 XLB Jun 25 Put
Have you ever considered UNG instead of USO? It’s based on Natural Gas which has taken a beating lately. I sold some Vertical Spreads on this today. I’ve set up a new blog at http://www.investusingoptions.com
Ronan, Congrats on setting up your new blog. Looks like you are off to a good start with it. I watch UNG sometimes, but follow oil more often. Thanks for the reminder though, I’ll move it back up to my regular hit list.
Yeah, it’s interesting that the Nat Gas – Oil ratio has gone so high. A (quite risky) trade I’m seriously considering would be to sell USO Oct 38 Calls at $3.70 and buy 2 UNG Oct 16 Calls for every 1 USO sold at a cost of $2 each for a net debit of $0.30.
In my opinion, if USO were to double to $74.80, alot of people would be tempted to convert their auto’s to Nat Gas and the supply-demand would cause the 19 ratio to close to something closer to 7 to 1. Even by closing to 9.5 to 1, UNG would need to rise twice as fast as USO. If this were to happen, with USO doubling to $74.80, UNG would need to rise to $58.24. This would mean that your USO Call would cost you $3680 but your 2 UNG Calls would make you $8448 giving a profit of $4768
I think oil is rising as a forewarner for some massive inflation. Be afraid, be very afraid.
I think demand for oil may increase in coming months, which may push the oil prices to go up to $100.. this may be again with more volatility than expected.. so play the safe game while trading on oil.
Some times it’s very interesting to see market reaction to disappointing news like job losses higher than expected and despite that markets still rise. I agree that it’s very important to find the right shares to shorten to take full benefit.