USO/$25KP, STP, Nicha - I'd like to see where things settle down next week. In the $25KP, the 10 April $28 calls have dropped to $1.35 with USO at $26.33. As a roll, I'm looking at selling the July $26 calls for $2.50 and rolling to the $22 calls at $5 for + $1.15, which would put us in the $4 spread for net $3.80 + $1.15 = $4.95 and we could DD at $2.50 for net $3.73 and the upside on 20 would still be 50% but only if oil holds $69, of course. I certainly like that spread as a new trade, since it's got a 60% upside from a $2.50 entry if oil holds $69.
If you buy $100 worth of gas a month and want to keep paying under $3 per gallon ($800 over 8 months), you can hedge by buying 1 of the July $22/26 bull call spread for $250 and, if oil stays where it is or higher, you get +$150 back (almost 20%) and the only way you lose $250 is if USO drops $4 (15%) in which case your cost of gas should go down 15% - that's how you use a hedge to lock in a favorable price!
In the STP, unfortunately, we got more aggressive with 20 of the USO Jan $29 calls and those poor things have dropped to 0.31 and we're down about $1,500. As above, I would rather wait until next week to see what sticks before rolling (or quitting).
In our Top Trade Alert from Wednesday, our premise for a quick bounce is blown and we had:
- Jan $27/29 bull call spread at $1.05. The Jan $27s are now 0.92 so I would roll them to the July $22/26 bull call spread at $2.50, salvaging most of the value of the long calls, and leave the short Jan $29s (0.30) to expire with a stop at 0.45.
