Buy Alert: May 29, 2015
Buy Alert: May 29, 2015
Option Strategies:
Buy US Oil Fund $USO July 17, 2015 $20.00 calls for $1.05 or better.
Buy Newfield Exploration $NFX July 17, 2015 $37.00 calls for $2.30 or better.
Commodity Outlook: Crude Oil
It’s been a rather boring few weeks for the price of West Texas Intermediate (WTI). After running to $62.50 a barrel in early May, the commodity has traded in a lackluster sideways range at the high $50 area.
But now the bulls look ready to make another charge…
After trading down to $56.50 early in yesterday’s session, the commodity reversed strongly higher to close above $57.50. Investors are pushing WTI even higher in today’s session.
With the peak of the high-demand summer driving season just around the corner, there’s a very good chance bulls push crude beyond the early May high in coming weeks.
In a best-case scenario we may see WTI push to the mid-$65 range.
Here’s how we’ll play it…
Resource Trade #1: US Oil Fund $USO
As you know, $USO trades in lockstep with the price of WTI. When the price of oil rises, so does $USO. That’s why we’re buying a low risk call position in $USO.
Here’s what we’ll do…
Buy the $USO July 17, 2015 $20.00 calls for $1.05 or better.
The current bid/ask spread for this contract is $0.96/$0.98.
Do not pay more than $1.05!
Our official entry price for performance tracking is $0.98. Your price may be higher or lower.
Exit Strategy:
Remember, we want $USO to trade higher. Our first profit target is $21.50 while our second target is at $23.00.
Our risk control line for this trade is at $19.00. If $USO trades below that level, conservative investors should consider closing this trade to preserve capital.
Resource Trade #2: Newfield Exploration $NFX
$NFX is a profitable mid-cap oil and natural gas producer with operations across the Western US. Shares of the company have been responding well to the oil price recovery in recent months. In fact, $NFX is already up 66% from the lows set in January 2015.
If oil runs back above $60 a barrel, $NFX will likely make another run at higher prices.
So here’s what we’ll do…
Buy the $NFX July 17, 2015 $37.00 calls for $2.30 or better.
The current bid/ask spread for this contract is $2.00/$2.15.
Do not pay more than $2.30!
Our official entry price for performance tracking is $2.15. Your price may be higher or lower.
Exit Strategy:
Remember, we want $NFX to trade higher. Our first profit target is $40.00 while our second target is at $42.00.
Our risk control line for this trade is at $35.90. If $NFX trades below that level, conservative investors should consider closing this trade to preserve capital.
Category: Commodity Trading
