My comments in the other thread have focussed on buying shares...

My comments in the other thread have focussed on buying shares in a US oil ETF (equivalent to OOO listed in Australia), but there is another strategy entirely that one can use to buy oil on a pullback.  The strategy that I refer to is writing puts.

Ok so oil has had a nice couple of days higher and you might not want to pay up at current prices.  The last traded price of this ETF in the US is $19.01.  Another way to trade the current market, may be to write (sell) a put option.  Based on the closing prices, one can sell a $19.00 put option that expires in just 16 days’ time.  In return for selling this put option, I am going to receive $0.70 per share.

So what is my obligation?  Well I have agreed to buy shares in this ETF at $19.00 per share on the 20th of March should the price be anything below $19.00 per share.  If for instance, the price closes at $18.50 on the 20th of March, I buy shares at $19.00, but I received $0.70 originally so my net entry price comes down to $18.30.

Should the EFT price remain the same or be higher on the 20th of March, well I have kept my $0.70 and that is the end of the deal…

Full list of current option prices below and I have highlighted the option I have referred to above.



Latest chart for the fund is below.  The vertical red lines are the option expiration dates both past and future.