An Interesting Proxy On Oil - 6 month UCO Call Options
Hello all,
if you are a bottom picker here is an interesting options play in the energy market on nothing more then a natural 'dead-cat-bounce'. I can make a realistic argument for $20 on UCO. This would be nothing more then a normal 38.2 Fib tag, gap fill and a bfrn tag (markets just love to run to big fat round numbers). I would expect this dead-cat-bounce to occur into a generally friendly time for the energy market (heading into peak summer driving season demand). Additionally, If you believe the oil price was brought down to leverage Russia into peace talks by 'the west' then today's announcement of a cease fire in Ukraine should support the idea of a bottom here too. On top of these arguments, both petro currencies (like the Cdn $) and the oil stock index's are putting in bottoms as well.
So that brings us to the trade. I am certainly not saying bet the farm on this but if you have some extra cash around this isn't a bad idea. For about $55 you can control 100 shares of UCO through to the middle of July, 2015 from $15.00 and higher. Should price move to my target area those options will have an intrinsic value of more than $5.00. Not a bad reward/risk! Indeed, if one were to pick a few up here I believe one could see $1.00 over the course of the next few months. if that should happen I would be inclined to sell half the position and get your original capital back in your hands and create a 'risk free' trade.
So one could take a position here today and instantly put an order to sell half the position at double your purchase price. Should you get filled on the first sale then by all means get your order to sell at $5.00 working on the rest.
glgt all
Brian Beamish
The Rational Investor
www.therationalinvestor.co/
if you are a bottom picker here is an interesting options play in the energy market on nothing more then a natural 'dead-cat-bounce'. I can make a realistic argument for $20 on UCO. This would be nothing more then a normal 38.2 Fib tag, gap fill and a bfrn tag (markets just love to run to big fat round numbers). I would expect this dead-cat-bounce to occur into a generally friendly time for the energy market (heading into peak summer driving season demand). Additionally, If you believe the oil price was brought down to leverage Russia into peace talks by 'the west' then today's announcement of a cease fire in Ukraine should support the idea of a bottom here too. On top of these arguments, both petro currencies (like the Cdn $) and the oil stock index's are putting in bottoms as well.
So that brings us to the trade. I am certainly not saying bet the farm on this but if you have some extra cash around this isn't a bad idea. For about $55 you can control 100 shares of UCO through to the middle of July, 2015 from $15.00 and higher. Should price move to my target area those options will have an intrinsic value of more than $5.00. Not a bad reward/risk! Indeed, if one were to pick a few up here I believe one could see $1.00 over the course of the next few months. if that should happen I would be inclined to sell half the position and get your original capital back in your hands and create a 'risk free' trade.
So one could take a position here today and instantly put an order to sell half the position at double your purchase price. Should you get filled on the first sale then by all means get your order to sell at $5.00 working on the rest.
glgt all
Brian Beamish
The Rational Investor
www.therationalinvestor.co/