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Oil call options - easy money?

Spacealien2

Well-known member
Apr 29, 2012
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I bought two USO call options with $5 strike with expiry in January next year costing $100 each. Will likely make almost 1000 each when it gets back to $12-14.
 

daywalker11

Mongerer
Dec 27, 2011
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I would imagine you make money on these but the thing you need to consider is the term structure of the futures curve for oil. USO buys futures, not physical barrels of oil as that is impractical. Right now there is heavy contango in the curve, ie. futures curve sloping up.

For example, when we move to June contracts from May, USO will lose the opportunity to gain nearly 20% because the June futures are ~$4 more than May’s.

Oil may very well end up in the teens as demand collapses... or, oil can be back at $50 as this price war and economic chaos leads to some conflict in the Middle East. Who knows at this point.
 

Spacealien2

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Apr 29, 2012
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Thanks for the info! You're right!

I think oil will back to normal once the Russia - Saudi price war is over. I also foresee that oil demand picks up as the corona virus dies out - airlines start flying again!
 

Ceiling Cat

Well-known member
Feb 25, 2009
28,189
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You can bet your house cat that oil will go back to what it previously was or higher. The war between Russia and Saudis is set up to get the world oil prices higher. Both pretend to get hurt, then they go back to normal and start to raise prices slowly. Now that the covid-19 crisis is upon us they will have to do less to kill off all the frackers. The oil pipelines are necessary for the trapped inland oil to get to ports and refineries. It is also a necessary supply for the national security of the USA. A steady flow of oil means less fluctuation of prices.

Article : $1 Oil: Saudi Arabia's Attempt To Crush U.S. Shale

quote :

Whether or not the Saudis manage to capture market share, U.S. producers are set to lose the most. Oil prices in many states have fallen into the teens and in some states we are already seeing oil selling for $1 per barrel, causing producers to shut-in a huge number of wells as demand for their crude is slowly drying up.

https://oilprice.com/Energy/Energy-General/1-Oil-Saudi-Arabias-Attempt-To-Crush-US-Shale.html
 

Spacealien2

Well-known member
Apr 29, 2012
1,838
177
63
Heaven
You can bet your house cat that oil will go back to what it previously was or higher. The war between Russia and Saudis is set up to get the world oil prices higher. Both pretend to get hurt, then they go back to normal and start to raise prices slowly. Now that the covid-19 crisis is upon us they will have to do less to kill off all the frackers. The oil pipelines are necessary for the trapped inland oil to get to ports and refineries. It is also a necessary supply for the national security of the USA. A steady flow of oil means less fluctuation of prices.

Article : $1 Oil: Saudi Arabia's Attempt To Crush U.S. Shale

quote :

Whether or not the Saudis manage to capture market share, U.S. producers are set to lose the most. Oil prices in many states have fallen into the teens and in some states we are already seeing oil selling for $1 per barrel, causing producers to shut-in a huge number of wells as demand for their crude is slowly drying up.

https://oilprice.com/Energy/Energy-General/1-Oil-Saudi-Arabias-Attempt-To-Crush-US-Shale.html
Cool I'm going to sell my kidney as well to raise capital
 
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