Wednesday, October 28, 2009

Profit From Oil Going Up Or Down

Oil above $80 will choke the weak economic recovery in the U.S., yet, the near-collapse of the U.S. dollar may continue, and a major market correction is coming. Oil has forces pushing it up and down. Which one will prevail?

Nobody knows. This is another situation for using straddles, which allow the investor to profit when the underlying stock moves iether way, as lng as it moves. Below are the November and December plays for to very popular ETFs: USO and UCO (our favorite as it has much higher volatility). UCO is a leveraged version.

The straddles were computed with StraddlesCalc tool.

(please click to enlarge)

The maximum moves required for profitability are shown. Actual moves needed may be smaller as we still have over 20 days to expiry.

You can follow the movement with these particular options over the last 30 trading days here:

We also track all oil ETFs here.

Not advice. Please do your own due dilligence. Options are very dangerous and may cause 100% loss if used incorrectly.

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