A Simple Option Trading Strategy? (USO MAY 29'20 3.5 Put)

Naked

Sold USO MAY 29'20 3.5 Put. Meaning, if USO is below $3.5, I am forced to own USO underline at whatever the price happens to be after the May 29th expiration date. The MAX Return of $114 is the premium I receive for taking the risk of having to own USO, the projected MAX loss of $236 happens to be the current cost of USO $2.36. However poorly USO performs in the next few weeks, I don't mind owning USO considering I have received $114 (premium) for my effort of taking on the risk. 

Comments

  1. If you are familiar with options trading, please let me know how well or not I am explaining this option strategy. If you are new to options or have no clue about them, does this explanation of selling an option make any since?

    Your feedback matters.

    ReplyDelete
  2. Just read this today thought you'd be interested:
    https://seekingalpha.com/article/4339102-uso-now-detaching-from-reality

    ReplyDelete
  3. Thanks MBA for the article, "Detaching From Reality" is a perfect title to the article. As of now the position is up 17%. For clarity, I am collecting a premium for selling the USO put, if I have to own USO at what ever price, I am ok with it being under $3. This is where I disagree with the articles conclusion. The article states that "for a rational investor, it makes no sense to buy USO to bet on crude’s recovery."

    Maybe I misread that part of the conclusion, but owning oil at these historic lows is a once in a lifetime opportunity, especially for the small retail trader such as myself. I guess I am betting that the Worlds demand for oil will comeback again some day.

    ReplyDelete

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