Stock / Symbol: [private_monthly]United States Oil Fund / USO[/private_monthly]
Price at trade post: $33.60
Option Strategy: diagonal call spread
Max Risk: $910
Max Reward: $356 or 39% by Sep 2011 expiration
Profit Range: $31.30 +
Max Reward Price: $34 at Sep 2011 expiration
Reasoning: This is a bullish play on Oil. We're going to take advantage of the recent pullback in oil using [private_monthly] USO[/private_monthly] as it tracks oil nicely and has relatively low volatility. This trade can yield us a very healthy gain if the stock closes at or above $34 by Sep expiration. If it closes under $34 by Sep 16th, we'll have taken in an uncalled return of 25% and will then look to sell Oct calls against the position. We also like that our break even on this trade is 2 points lower than it's current price.
Trade Details:
[private_monthly]
BTO 2 USO Mar12 30 Calls
STO -2 USO Sep11 34 Calls
for a net debit of $4.55 per contract
Requirements
Cost/Proceeds $910.00
Option Requirement $0.00
Total Requirements $910.00
Estimated Commission $12.95
[/private_monthly]
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