Friday, August 29, 2008

A Very Attractive Strategy on Oil

Oil prices are expected to move quite a bit in the next few days. Straddles and strangles could be considered. These strategies allow the investor to benefit if the oil moves both up or down. This page shows some possibilities for both USO and UNG (prices will be updated a few times during the day today):

Clearly the USO positions are very attractive. The first two positions require a move of around 9% to be profitable. With oil expected to either move to 130 or drop to 110 that will be achieved and surpassed. Given that we still have more than 2 weeks to expiration, there will be also residual value on the side of the straddle that goes wrong.

Looks very good, please do your due diligence.

UPDATE 3:50PM: Best strangle was:

93 puts: $4.20 x 12 = $5,046
94 calls: @$4.15, *12 = $4,986

Total invested = $10,032


UPDATE Tuesday September 2nd, prices, 10AM:

93 puts: $7.70 x 12 = $9,240
94 calls: @$1.60, *12 = $1,920

Total amount = $11,160

Return on Investment: 11.1%

Stumble Upon Toolbar

No comments:

Financial TV

Blog Archive

// adding Google analytics