Buying A Call Option On United States Oil $USO

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• OPTIONS TRADING

Buying A Call Option On United States Oil USO
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• Hi, My name is Steve and Im with Options Trading
  Research, today were reviewing our recently
  published article

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• Buying A Call Option On United States Oil USO

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• Crude oil is once again making headlines as it
  plunges towards the 40 per barrel mark. The
  worlds most popular commodity has dropped 20
  over the past month and has everyone trying to
  pick a bottom.

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• Is a drop in the price of oil good for the
  economy? Is it bad? Its actually a little of
  both, depending on perspective. Overall, its
  probably a good thing for the US economy since we
  tend to use a lot more of the commodity than we
  export.

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• One of the most popular ways to trade crude oil
  is through the United States Oil ETF USO.
• USO is a heavily traded ETF which tracks the
  price of crude oil. The fund trades about 20
  million shares per day.

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• Even though commodity ETFs have their issues,
  trading them is still the easiest (and cheapest)
  way to buy and sell commodities. Currently, USO
  is trading at 14.07.

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• Thats 61 from the 52-week high and already 2
  below the previous 52-week low. The ETF is down
  29 on the year so far.

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• So is now the time to buy a call option on USO?

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• As a reminder, a call option makes money when the
  underlying stock goes up. Has USO finally found
  a bottom?
• For a more in-depth look at this widely traded
  oil ETF, you can click the link.

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• Heres the deal
• The price of crude oil is getting hit again for
  the same reasons as always. Theres simply a lot
  more supply than demand. Recent refinery
  outages in the US have resulted in the countrys
  stockpiles growing even bigger

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• . And, theres no reason to believe the glut is
  going to end anytime soon.
• China and other emerging markets arent seeing
  enough economic growth to increase demand for
  oil. Its more like the opposite.

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• Without a rise in global demand, oil producers
  are basically just adding to stockpiles whenever
  they get a new barrel of oil from the ground.
• Heres the chart of USO

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• As you can see above, the ETF has plummeted this
  year. First there was the great oil decline of
  2014. Now, crude oil is falling once again
  this time to new lows of the year. The price of
  USO is well below the 50-day moving average.

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• Now could be a great time to buy an USO call
  option.

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• Despite all the negative news regarding oil, this
  may actually be a great time to buy a call.
  Well, at least its a great time to buy a
  long-term call. The supply/demand fundamentals
  are too bearish right now to expect a quick
  rebound.

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• However, the entire trading world seems to
  bearish oil. Thats generally a sign the bottom
  is nearing. Eventually, oil producers are going
  to have to shut down or slow excess oil
  production or risk going out of business. This
  will lead to lower supply in the long-run.

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• Given the fundamentals of the situation and the
  look-term outlook, I recommend buying a long-term
  USO call in this situation. The January 2017 15
  calls are trading around 2.25.

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• That looks like a good price for an option within
  a dollar of being in the money, and still has 17
  months until expiration.

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