Weekly Update: September 2, 2015
Weekly Update: September 2, 2015
Big Picture Outlook:
Well friends, it looks like the crude upturn we talked about in last week’s update came a little early…
As I’m sure you’re aware, WTI crude kicked off a phenomenal rally last Thursday. The commodity surged from $39 a barrel all the way up to $49 by Monday- a 25% move in just three sessions.
What sparked this quick upturn?
Not only did investors learn last week that US production is beginning to slow meaningfully, but OPEC is starting to talk up the market. The Middle East oil cartel recently announced they’re willing to hold talks amongst their members on how to fairly cut production.
Clearly, all this deeply oversold market needed was a few tidbits of new information to spark a dramatic short covering rally!
Where does crude go from here?
Let’s shed some additional light on the situation below…
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 November 20, 2015 $14.50 calls
Thankfully we were able to get in on the recent crude rally. Our Friday morning purchase of the $14.50 strike USO calls turned into a nice profit by Monday.
As you know, USO hit our first target at $16 on Monday afternoon, which should have netted conservative investors a quick 50% gain.
Remember, conservative investors should always close a portion of their position at the first profit target!
Of course, crude gave up quite a bit of its recent advance on Tuesday when the equity market succumbed to additional China worries.
But here’s the deal…
With OPEC starting to complain about low prices, it’s unlikely WTI revisits the $30 a barrel range. If it does, it won’t be for long. As a result, if you weren’t able to collect profits on the last rally to $16 in USO- just be patient.
We have until November with these calls, which is ample time to see WTI rise back above $50 a barrel. Such a situation will likely send USO to our second target at $18!
. . . . Oasis Petroleum $OAS October 16, 2015 $11 calls
I’ll admit, I’m disappointed in our $OAS calls…
Even though $OAS surged 11.9% from Friday to Monday afternoon, our $11 October calls barely budged. The highest bid price I see on the $11 calls is $1.54 on Monday afternoon. That’s a 10% gain from our entry.
Let’s see if OAS can muster another rally, which may finally set these calls into motion.
Keep holding these calls for higher prices!
Category: Commodity Trading
