Weekly Update: June 24, 2015
Weekly Update: June 24, 2015
Big Picture Outlook:
Well folks, one thing has become abundantly clear over the past few weeks…
Trading in major commodities like oil and gold has slowed to a snail’s pace.
As you’re aware, WTI crude is still stuck in a tight range near $60 a barrel. Neither bulls nor bears appear willing to make a stand with this commodity. As a result, volatility in oil stocks has noticeably decreased in recent trading.
The same goes for gold…
Despite a $30 an ounce drop the past three days, the yellow metal is still stuck in the same range it has been in since early April.
And while silver appears ready for more downside, sellers haven’t been able to take it below $15.75 an ounce. As a result, the metal has traded in a relatively tight $0.50 range since June 5th.
The question now is- when will volatility return?
Given the bullish situation in the US Dollar, which trades inversely of these commodities, we may have a rather dull few weeks ahead of us.
The only things I foresee adding excitement to the commodities landscape are a potential Greek debt default or a big downturn in the Dollar.
If either of these scenarios occurs, volatility in oil, gold, and silver will increase quickly.
For now, let’s stay patient.
I have no doubt great option trading opportunities lie ahead in the commodity/natural resource stock arena!
Let’s check on a few of our open positions…
Portfolio Highlights:
Editor’s Note: I won’t update every open position in every update. I focus on the positions with significant news or price movement.
. . . . US Oil Fund $USO July 17, 2015 $20 calls
It was another uneventful week in WTI crude as the commodity is still range bound at the $60 a barrel area. And despite a large 4.9 million barrel inventory drawdown for the week of June 19th, traders sold WTI down $0.80 in today’s session.
Time is running short in these $20 USO call options. We need a bullish move soon in order to get this position profitable. Remember, we adjusted the risk-control line up to $19.85 from $19.00 last week.
If $USO trades below $19.85, conservative investors should close this trade to preserve capital.
. . . . iShares Silver Trust $SLV July 17, 2015 $16.50 puts
$SLV dropped to a new multi-month low at $15.07 yesterday. The downturn sent our $16.50 $SLV puts up to a $1.40 bid, which is a 108% gain from our entry at $0.67.
Remember, this trade hit our first profit target and achieved a 100% gain. As a result, everyone should have taken at least a partial profit here.
If you’re aggressive, you can hold your remaining contracts for another downturn in $SLV to our second target at $15.00.
. . . . Market Vectors Gold Miners $GDX July 17, 2015 $19 puts
The post-FOMC gold rally was short lived. As a result, $GDX is trading near the low set last week. One more rush of selling and $GDX could crumble to our first profit target at $18.00.
Remember, our risk control line was adjusted down to $19.25 from $20.10.
While our expiration is a just a few weeks away, we still have a very good chance of profiting from this trade. Keep holding your $GDX puts for further downside in gold miners.
. . . . Silver Wheaton $SLW July 17, 2015 $18 puts
Unfortunately, $SLW just barely tagged our risk control line at $19.00 last Thursday before continuing lower this week. As it sits now, $SLW looks ready for another leg lower to our second profit target at $17.00.
If you’re still in this trade, keep holding your puts for further downside in $SLW.
. . . . SPDR S&P Oil & Gas Exploration & Production $XOP September 18, 2015 $48 puts
$XOP caught a bid off the $48 area on Monday. The short-term rally sent the ETF up to a high of $49.50 early in today’s session. However, sellers entered the fray again taking $XOP back down to $48.44 by day’s end.
Keep holding these puts for further downside in $XOP. $48 may be a tough barrier to break through, but once it does, $XOP should quickly collapse to our first target at $46.00.
Remember, our risk control line is at $50.25 in this trade.
Category: Commodity Trading
