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USO

THE WEEK AHEAD: USO, XOP, XLE DOWNWARD PUT DIAGONALSWhile I'm waiting for my August monthly premium selling plays to grind out, I'm pounding the pavement for potential directional plays to get in on. Late last week, I shorted TLT at the 122 horizontal resistance level I alerted last week via the inverse TBT, (See TBT Upward Call Diagonal Post Below), so I'm looking for fun in other places, one of which is in USO, XOP, or XLE (pick your poison). Granted, USO is pesky and hard to work with due to its size. Nevertheless, it's a good small underlying that small accounts can potentially work without it causing too much pain in the event things don't go your way. This week, I'm eyeing the resistance level at 16 for a long-dated bearish assumption setup. Naturally, you can do a risk one to make one, static one-off spread to play it (i.e., a short call vertical or a long put vertical wrapped around 16 if we hit that level), but I generally opt for setup flexibility in the event I feel I need more time for the play to work out and/or to reduce cost basis, and my go-to setup for that is a diagonal. Pictured here is an Oct/Jan 14/19 downward put diagonal, with the following metrics: Max Loss on Setup: $370/contract Max Profit on Setup: $130/contract Break Even on Setup: 15.30 vs. 15.06 spot Debit Paid/Spread Width Ratio: 74% Take Profit: 20% of debit paid or $74 Naturally, if USO gets to 16, some adjustment to the setup will be required, so this is just an example of the setup I would use (i.e., (1) setup break even at or above spot; (2) debit paid/spread width ratio of <75%). The other thing to note is that I'm not particularly fond of going out to October for the front month. Currently, however, no Sept expiry is available and the Aug 17th 14 short put strike is paying a paltry .20. Consequently, I can potentially see (a) just buying the ~90 delta long put back month if we hit 16 and then subsequently legging into the short put aspect on a meaningful drop; or (b) buying an Aug/Jan setup in spite of the paltry .20 received for the 14 short and then rolling the short out in time to bring in more credit if we get a drop in price such that the 14 strike brings in a significant credit (I generally opt for the latter; some cover is better than no cover at all, even if it is a lousy $20)). Natural alternatives would be a similar setup in XOP on a hit of overhead horizontal resistance at 44.50-45.00. There, however, I'd probably go with my standard "skip month" diagonal: preliminarily, the Aug/Oct 41/48 costs 4.84/contract to put on, has a nice 2.16 max profit on setup, a break even of 43.16 versus 43.06 spot, a debit paid/spread width ratio of 69.1%, and a 20% take profit of $97/contract. Similarly, XLE overhead resistance is between 79 and 80: preliminarily, the Aug/Dec (no October monthly available) 73/86 costs 9.86/contract to put on, has a max profit on setup of 3.14, a break even of 76.14 versus 75.94 spot, a debit paid/spread width ratio of 75.8%, and a 20% take profit of $198/contract. That 75.8% metric is a bit more than I'd like to pay, but the trade off is having more roll opportunities to reduce cost basis and improve my break even. OTHER PENDING ALERTS: IWM SHORT, DOWNWARD PUT DIAGONAL/POOR MAN'S COVERED PUT AT ~170 or QQQ SHORT, DOWNWARD PUT DIAGONAL/POOR MAN'S COVERED PUT AT ~177 (PRIMARILY TO ADD SHORT DELTA TO COVERED CALL PORTFOLIO). GLD BULLISH ASSUMPTION SETUP AT ~115 OR GDX BULLISH ASSUMPTION SETUP AT ~21.
AMEX:USOShort
by NaughtyPines
1
Dollar about to EXPLODE. Short OilIn this video I dive into why the USD (US Dollar) is going to shoot much higher than anyone thinks, and why Oil is going to crash in the coming months. USD refused to break down and has now reversed course, climbing back higher, through key levels of resistance. I think we are going to see a lot of funds flowing back into the USA because it is the only country with rising interest rates and the cash out there is looking for yield. If the dollar goes higher, than that means oil, all things being equal, is going to decrease in price. So my play is short oil and long the dollar!
TVC:DXYLong
by BerlinTrader591
THE WEEK AHEAD: PBR, USO, GE, T, ORCL, EWZWith various things Brazilian in implosion mode, it's no surprise that PBR and EWZ have high implied volatility here. PBR: Bullish Assumption Setups: The July 20th 30 delta 9 put is paying .43/contract, resulting in an 8.57 break even, which isn't very compelling, but might appeal to some smaller account holders who are willing to hold the short put until near worthless and or roll for duration/further cost basis reduction should the worst not be over (check out the weekly). The natural alternative is a synthetic covered call with the short put at the 70 delta 11 strike, which pays 1.55, and gives you a 9.55 break even. I would work the synthetic as a "money, take, run" affair and look to take profit at 50% max or sooner. Neutral Assumption Setups: The July 20th 10 short straddle pays 1.56 at the mid, with break evens at 8.44 and 11.56. Generally, I look to take profit on these at 25% (here, .39), but would naturally be prepared for a bumpy ride and to make adjustments as things unfold. USO: I generally don't like this instrument a ton as a petro play due to its size, with my preferred go-to's being XOP, XLE, and (when in a pinch), OIH. However, if you're willing to go a little larger than you usually would with contracts, it can be productive. The July 20th 13 short straddle pays .93/contract and is skewed quite short delta wise (-20.93). To neutralize some of that, I could see doing a July 27th "double straddle" with one straddle at the 13 and one at the 13.5 (you need to move to the weeklies to get the half strikes). That would pay 2.01 per contract, give you break evens at 12.25 and 14.25, and reduce the directionality to -9.67 delta. Taking profit on the whole shebang at 25% max (.50) wouldn't be horrible. GE and T: Both have earnings around the July monthly; I'd hold off putting on plays, opting instead to play for vol contraction around earnings ... . ORCL: Announces in 9 days, so sit on your hands and play the announcement. EWZ: With underlyings under $50, I've been short straddling or iron flying. The July 20th 34 short straddle pays 3.09, with break evens at 30.91 and 37.09. Naturally, that isn't for everyone, since short straddles and iron flies generally skew out delta-wise fairly immediately, so they're not "nervous nellie" trades or trades for the "delta anal"; for those kids, the July 20th 31/37 short strangle camped out around the 20 delta strikes might make more sense; it's paying .98.
NYSE:PBR
by NaughtyPines
OPENING: USO JULY/OCT 10/13/13/16 DOUBLE DIAGONAL... for a .77/contract credit. Truth be told, I kind of hate USO, with XOP being my go-to for petro-based plays. That being said, with its high implied volatility rank (65) and its decent background volatility (31%), I figured I'd throw a "can't hurt much" trade on here as a demo trade for a "safety tape" setup. The basic notion of a "safety tape" trade is to define your risk with longer-dated, cheap throwaway longs, while trading essentially naked inside the longs. This is particularly useful in cash secured/small account environments where being naked invokes a buying power reduction equal to the short put strike minus the credit received and/or where brokers generally prohibit naked short calls, with the workaround being to buy a cheap long call anyway to define the theoretically infinite risk that a naked short call entails. Alternatively, it's a way for people who fear the notion of full on naked from a risk standpoint to get some of the benefits that trading naked entails (i.e., fewer legs, quicker vol crush and/or theta decay, easier rolls) without "hanging all their junk out there." (No one wants to see that). Here, the buying power effect is attributable to the widest wing of the setup (3.00), minus the credit received (.77) or 2.23, far less than you'd tie up trading the naked short straddle cash secured (basically, $1200, since the July 20th 13 short straddle is trading for about a 1.00 here). I'll look to take profit on the short straddle at 25% max as I would if I were just trading it purely naked, and then sell another ATM short straddle, reusing the longs as many times as I can before they expire ... .
AMEX:USO
by NaughtyPines