Catch the Next Big Move in Oil
Everybody, for a freebie down here, we're going to talk about USO -- why I like it essentially. So this is Brent Crude, you can see here Brent Crude weekly chart we got a squeeze, very powerful set up here. And this of course is the daily chart. Now this actually looks a lot different than the oil you're probably used to looking at which is SCO, which is what USO tracks. But the thing about it is, is that these two commodities track each other. CL is lagging, right, and needs to catch up.
Where is Oil Headed
What I'm looking for, at this point, is for crude oil to get back up to like 103. So that brings us to USO, because this is an obvious you know, signal kind of thing. And what's nice about this is on a daily we got this squeeze setting up. We got some nice volume. And again, we're just playing the odds here. But for retracement on this you know, a 50 percent retracement would take us to 36 bucks. And then a 618 would take us here. You know, I think there's potential that we could actually make new highs into February, March, 2014. All right.
How Do You Play This?
So there's a couple of different ways to play this. If you're using, you know, futures -- like here you know, I got you know, 20 contracts from $94.00. It's had a nice run. You can see the marginal crown on that is pretty stiff right. Also this had a spread here, sold one 94 put, bought one 93 as protection, one 93 of them. Now you can see both will expire worthless, keep that credit. And then just sold a $95.00 put naked for you know, a buck 55, now it's at 46 cents. So that's on but you know, if you've got a small account obviously doing futures on that is not going to work. So that's when you bring up USO.
Now for USO you can see that I was able to buy a thousand contracts 135 days out and put up about the same amount of money as 20 futures contracts. So what you can do here is if you've got a small account, say $10,000.00, obviously you're not going to buy a thousand contracts, but you can actually say, you know what, you know on this trade I'm willing to risk $690.00 outright. OK. So you know, that would be max risk, so if you bought 10 contracts at you know, 60 -- oh, let's call it 79, that's where it is now, then that would be -- and let's round it up for commissions -- that would be $800.00. OK.
Your max risk on that would be 8 percent, right, and that means if it goes to zero. Obviously, you could have a stop in place -- so let's say if it got to 20 you could just dump it. But I think with options like this if you're out the money, you just risked the premium. So that might mean, well, you know what, I actually only want to risk just 4 percent. So great, you would buy 5 contracts. Or maybe you only want to risk you know, 2 percent, etc. So what's nice about this is you can tailor that. And so for me, I'm doing this trade where I'm long 20 CL and then I've also got a thousand USOs out 135 days. This CL, the crude oil futures is a shorter term move. This is to try to sit in for a potential longer term move, OK.
I hope that all makes sense. You guys all have a great night and we'll see you at the next update. And as a reminder, this Saturday, I'm going to be doing kind of a class just on ETFs. If you go to simpleroptions.com/etf it'll bring you to this page. But it's essentially secrets to trading options on ETFs. This is going to be this upcoming Saturday, December 7th from 1:00 to 5:00 east coast time which will be 12:00 to 4:00 central. It's going to be interesting because Saturday we're scheduled to have freezing rain here in Austin. So we might all just sleep at the office.
At the Saturday class I'm going to be talking about all of the ETFs. The thing about it is, in 2014 there are a ton of seismic shifts happening across various asset classes. And the easiest way to take advantage of these bigger moves is going to be via these ETFs. Oil is one, natural gas is another one...gold and silver. I'm going to show you the signal that I'm looking for when they bought them -- currency, etc., etc. And all this can be done for some longer-term kind of whales, homerun trades where you're talking about 10 baggers. You know, you buy options let's say for 50 cents and sell them for $5.00, right. So then there's also like 3 to 10 day trades which are pretty nice too. So the Saturday class we're going to be talking about what key markets to use for your analysis of ETF trades, all right. Because you actually don't want to just chart the ETFs. The ETFs are faulty, especially the double and triple ETFs. I love trading the double and triple but if you trade them incorrectly you're going to get killed.
Here's What to Look Forward to On Saturday
This course of course will all be recorded. This class, we're going to put this up on the site for $1497.00. You can sign up if you're seeing the page for $497.00. And if you're interested in doing a live mentorship after that, we're going to do three days of live trading. What you can do -- if the idea of the Saturday class sounds good --but I also want to see you do it live, and also see all the scans that you do and how you look for this stuff real time and be able to ask you question real time as if you're trying to do your own trade. And you can also sign up for the mentorship after which is $997.00.
Now again, if you're getting this there's a special where, instead of signing up for this and that, where that together is something like what...$1494.00, give or take. You can, if you sign up for this, you actually just get that for free. So if you sign up for that you actually get this for free and your final price is just $997.00. So anyway, hopefully that makes sense. Looking forward to seeing you guys on Saturday and enjoy the rest of your day.