11 February 2020 Tuesday newsletter / TRADE COMMENTARY
February 11, 2020
Greetings on Tuesday, 11 February 2020:
Crude Oil dipped below $50. Just a month ago on 8th January 2020, the MAY2020 futures peaked at 64.39 a barrel. The stock market, depending on one’s view has either ‘factored in the Corona,’ OR chooses to believe it might be under control. All this of course could change on ‘one bad news’ day. And that is a risk to almost any trade these days.
New Trade: This morning I sold a MAY20 Crude Oil short strangle: I sold the 65-strike CALL for 0.10 ($100) and I sold the 37-strike PUT for 0.15 ($150) for a total premium credit of $250. These options expire in 65 days on April 16, 2020 – about two months out. Prob the options expire OTM: 94% Initial Margin: $888, potential return: 28% based on initial margin (which can change of course during the trade.)
There is not shortage of crude in the world and since it has fallen $15 a barrel recently, I think the 37 PUT might be safe over the next 65 days.
Here’s the chart:
I’m also looking to sell a GOLD PUT option. I expect to do this within a week. Gold and the Stock INDEXES are inversely correlated. I’ll stand aside another week to see if the Stock Index goes up even more (and gold prices a little below present prices) first.
If/when the stock market has an adjustment or change, Gold price would shoot up rather fast. I want to sell a far OTM PUT soon and when the market has an adjustment, there could be a nice profit there.
With Corona virus still an unknown, and China Trade Talks anything but firm and reliable, I remain out of the grains for now.
I will post immediately when/if I sell a gold PUT.
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Have a great week and good luck. – Don
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