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 $9.50-$10.00 in-the-money vertical Bull call spread at $0.43 up to $0.47
Opening Trade
10-2-2019
expiration date: October 18, 2019
Portfolio weighting: 10%
Number of Contracts = 114 contracts
Saudi Arabia announced that it was back up to 9.9 million falls a day, repairing all the drone damage of two weeks ago. This has triggered a 2.23% drop in the price of Texas tea this morning.
This has taken oil down a stunning 17.43% in a mere two weeks, a gigantic move. Recession fears are also weighing heavily on oil.
I am therefore buying the United States Oil Fund (USO) October 2019 $9.50-$10.00 in-the-money vertical Bull call spread at $0.43 or best.
Don’t pay more than $0.47 or the risk/reward will go against you.
This is a bet that the United States Oil Fund (USO) will not trade below $10.00 by the October 18 option expiration day in 12 trading days. That would require the price of oil to fall by another 10% from the present level, from $52.50 to $47.30.
To do that oil, would have to crash below the 2019 low in two weeks. That’s a bet that I am willing to make.
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 220 October 2019 (USO) $9.50 calls at………….………$1.50
Sell short 220 October 2019 (USO) $10.00 calls at……….$1.07
Net Cost:………………………….………..………….…................$0.43
Potential Profit: $0.50 - $0.43 = $0.07
(220 X 100 X $0.07) = $1,540 or 16.27% in 12 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.
