Buy Alert: August 28, 2015
Buy Alert: August 28, 2015
Option Strategies:
Buy US Oil Fund $USO November 20, 2015 $14.50 calls for $1.60 or better.
Buy Oasis Petroleum $OAS October 16, 2015 $11.00 calls for $1.45 or better.
Commodity Outlook: Crude Oil
Believe it or not, WTI crude is finally bouncing…
The deeply oversold commodity surged 10% yesterday to close at $42.50 a barrel. Yesterday’s rally was the biggest percentage gain this market has seen in six years!
But let’s be clear…
The remarkable advance was likely due to short covering instead of new longs coming into the market.
As a result, don’t be surprised to see a bit of back filling to lower prices in WTI the next few days. The market needs to pull back to a price area where it finds real buyers, not just shorts exiting their positions.
However…
The recent price action in the crude market does suggest a bottom, at least in the short-term, is likely in place. That means the odds support further upside in WTI in coming weeks.
Here are a couple ways to profit from this situation…
Resource Trade #1: US Oil Fund $USO
As you may know, $USO is the most heavily traded oil ETF in the marketplace. When traders want an efficient and easy means to get long crude, $USO is typically their choice.
Remember, when WTI crude rallies so does $USO.
So here’s what we’ll do…
Buy the $USO November 20, 2015 $14.50 calls for $1.60 or better.
The current bid/ask spread for this contract is $1.39/$1.51.
Do not pay more than $1.60!
Our official entry price for performance tracking is $1.51. Your price may be higher or lower.
Exit Strategy:
Remember, we want $USO to trade higher. Our first profit target is $16.00 while our second target is at $18.00.
Our risk control line is $12.50. If $USO trades below that level, conservative investors should consider closing this trade to preserve capital.
Resource Trade #2: Oasis Petroleum $OAS
We’re going back to the well with $OAS. As you know, we’ve traded this Bakken oil producer a couple times over the past few months with great success.
Each time crude has found bullish legs this year, $OAS has reacted very well.
So here’s what we’ll do…
Buy the $OAS October 16, 2015 $11.00 calls for $1.45 or better.
The current bid/ask spread for this contract is $1.15/$1.40.
Do not pay more than $1.45!
Our official entry price for performance tracking is $1.40. Your price may be higher or lower.
Exit Strategy:
Remember, we want $OAS to trade higher. Our first profit target is $13.00 while our second target is at $15.00.
Our risk control line is $7.90. If $OAS trades below that level, conservative investors should consider closing this trade to preserve capital.
Category: Commodity Trading
