Oil is expected to drop back to the 60s, or lower later this year because there simply is not demand for it. However, if the US dollar continues to collapse, it is unlikely that the oil producers will be happy accepting less and less for watch barrel of oil.
Straddles are ideal for these situations where the underlying stock may go up or down. Here are straddles for USO, for February, March, July, and also January 2011. As long as the stock moves the indicated amounts the positions will be profitable. If USO does not move, or goes up and then back down (or vice-versa) and the investor does not sell, then the positions loses money.
(please click to enlarge)Please do your own due diligence. This is not advice. Options are very dangerous and may cause 100% loss.
Computed with StraddlesCalc Tool, which shows the maximum moves required to achieve profitability.
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