Dear Friend,

The price of oil is fluctuating all over the place because of the uncertainty of OPEC’s current effort to get a widespread agreement to restrict supply.  This has resulted in unusually high short-term option prices for USO (the stock that mirrors the price of oil).  I would like to share with you an options spread I made in my personal account today which I believe has an extremely high likelihood of success.

Terry

Benefitting From the Current Uncertainty of Oil Supply: 

I personally believe that the long-run price of oil is destined to be lower.  The world is just making too much of it and electric cars are soon to be here (Tesla is gearing up to make 500,000 next year and nearly a million in two years).  But in the short run, anything can happen.

Meanwhile, OPEC is trying to coax producers to limit supply in an effort to boost oil prices.  Every time they boast of a little success, the price of oil bounces higher until more evidence comes out that not every country is on board.  Iran and Yemen won’t even show up to the meeting.  Many oil-producing companies have hated one another for centuries, and the idea of cooperating with each other seems a little preposterous to me. 

The good old U.S.A. is one of the major producers of oil these days, and it is not one of the participants in OPEC’s discussion of limiting supply.  Two significant new domestic oil discoveries have been announced in the last couple of months, and the total number of operating rigs has moved steadily higher in spite of the currently low oil prices.

Bottom line, option prices on USO are higher than we have seen them in quite a while, especially the shortest-term options. Implied volatility (IV) of the long-term options I would like to buy is only 36 compared to 64 for the shortest-term weekly options I will be selling to someone else. 

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Given my inclination to expect lower rather than higher prices in the future, I am buying both puts and calls which expire a little over a year from now and selling puts and calls which expire on Friday.  Here are the trades I made today when USO was trading at $10.47:

Buy To Open 20 USO 19Jan18 10 puts (USO180119P10)

Sell To Open 20 USO 02Dec16 10 puts (USO161202P10) for a debit of $1.20  (buying a calendar) 

Buy To Open 20 USO 19Jan18 10 calls (USO180119C10)

Sell To Open 20 USO 02Dec16 10.5 calls (USO161202C10.5) for a debit of $1.58  (buying a diagonal) 

Of course, you can buy just one of each of these spreads if you wish, but I decided to pick up 20 of them.  For the puts, I paid $1.43 ($143) for an option that has 60 weeks of remaining life.  That means it will decay in value by an average of $2.38 every week of its life.  On the other hand, I collected $.23 ($23) from selling the 02Dec16 out-of-the-money 10 put, or almost 10 times what the long-term put will fall by.  If I could sell that put 60 times, I would collect $1380 of over the next 60 weeks, more than 10 times what I paid for the original spread.

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Here is the risk profile graph which shows what my spreads should be worth when the short options expire on Friday:

My total investment in these spreads was about $5600 after commissions, and I could conceivably make a double-digit return in my very first week.  If these short-term option prices hold up for a few more weeks, I might be able to duplicate these possible returns many more times before the market settles down.

As usual, I must add the caveat that you should not invest any money in options that you cannot truly afford to lose.  Options are leveraged investments and can lose money, just as most investments.  I like my chances with the above investment, however, and look forward to selling new calls and puts each week for a little over a year against my long options which have over a year of remaining life.

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As a post-Thanksgiving special, we are offering one of the lowest subscription prices that we have ever offered – our full package, including several valuable case study reports, my White Paper, which explains my favorite option strategies in detail, and shows you exactly how to carry them out on your own, a 14-day options tutorial program which will give you a solid background on option trading, and three months of our Saturday Reports full of tradable option ideas.  All this for a one-time fee of $69.95, normally $139.80 (not including bonus reports).

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This is a time-limited offer.  You must order by midnight Monday November 28th, 2016.  That’s when the Black Friday/Cyber Monday offer expires, and you will have to go back to the same old investment strategy that you have had limited success with for so long (if you are like most investors).

This is the perfect time to give you and your family the perfect Holiday Season treat that is designed to deliver higher financial returns for the rest of your investing life.

I look forward to helping you survive the Holidays by sharing this valuable investment information with you for our first ever Black Friday/ Cyber Monday Sale. It may take you a little homework, but I am sure you will end up thinking it was well worth the investment. 

Happy trading.

Terry

P.S.  If you would have any questions about this offer or Terry’s Tips, please email Seth Allen, our Senior Vice President at seth@terrystips.com.  Or make this investment in yourself at the Black Friday/Cyber Monday sale price – the first time this has been offered in our 15 years of publication – only $69.95 for our entire package.  Get it here using Special Code BFCM16 (or BFCM16P for Premium Service - $199.95).   Do it today, before you forget and lose out.  This offer expires at midnight Monday November 28th, 2016.

                        ---------------------------------------

 
Any questions?   I would love to hear from you by email (terry@terrystips.com), or if you would like to talk to our guy Seth, give him a jingle at 800-803-4595 and either ask him your question(s) or give him your thoughts. seth@terrystips.com

You can see every trade made in the actual option portfolios conducted at Terry’s Tips and learn all about the wonderful world of options by subscribing here.   Why wait any longer to make this important investment in yourself?

Even better, you can become a Terry’s Tips Insider, and receive all our educational reports and materials absolutely free by opening a new account at the best options broker around - thinkorswim. If you open an account with our link, they will give you 60 days of free trading or up to $600, the same deals they give to everyone who opens an account with them. You must use this link to sign up - open thinkorswim account – and once you have funded your account with at least $3500, email Seth@TerrysTips.com and let him know that you have done it, and this is what he will do – sign you for our Premium Service package ($119.95 value plus an extra 4 months of our Premium Service, valued at another $190.80).  You get $300.65 worth of services without paying us one penny.

I look forward to having you on board, and to prospering with you.

Terry

    

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