Buy Alert: November 21, 2013
Buy Alert: November 21, 2013
Option Strategy:
Buy US Oil Fund (USO) January 2014 $34.50 calls for $0.85 or better.
Commodity Outlook: WTI Crude
Time for another trade in the oil markets folks…
WTI crude is breaking higher this morning thanks to numerous factors. First of all, US economic data has been coming in surprisingly strong in recent days.
But that’s just the tip of the iceberg…
As I mentioned earlier this week, Middle East uncertainty is picking up again. Not only did the Iranian embassy in Beirut get bombed on Tuesday morning, but recent negotiations with the rogue country are falling apart.
In case you’re unaware, the US and its Allies have been at the bargaining table with Iran over their burgeoning nuclear program for the past month.
The failure of these talks is bullish for the price of oil…
Given the crude market’s short-term oversold nature, now’s the perfect time to buy calls in the US Oil Fund (USO). As you know, USO rises with the price of oil.
Here are the important details you’ll need for this trade…
Trade Metrics:
| Underlying ETF Symbol: | USO |
| Call or Put: | CALL |
| Expiration Month, Day, Year: | January 17, 2014 |
| Strike Price: | $34.50 |
| Current Bid/Ask Price: | $0.79/$0.80 |
| Maximum Buy Up To Price: | $0.85 |
| Maximum Risk Per Contract: | $85 |
Here’s a breakdown of the important technical support and resistance zones in WTI crude…
Exit Strategy:
Remember, we want WTI crude to move higher. Our first profit target is $98 a barrel. If things really get out of hand in the Middle East, we could see crude test $100 in short order.
The risk control price is $89.50. If WTI drops below that level, conservative investors should consider closing this trade to reduce risk.
Until next time,
Justin Bennett
Category: Commodity Trading
