After the fall in oil prices, I was wondering how it can be done in the long term.

I decided to use vanilla options to buy an ETP called USO. The stock may not be suitable for a long-term investment in crude oil due to the negative impact of Contango, but I decided to make the transaction. Today, although I finally made money, I would choose another instrument, i.e. ETF, i.e. XLE.

I took advantage of the high implied volatility and put a PUT option to buy USO with an expiry date of May 29, 2020 and a strike of 0.5.

I would like to clearly point out that issuing options for people who do not have much experience may result in resetting the account!

On one option I risked "up to" $ 31 because 0.5 x 100 = $ 50 minus the $ 19 bonus I received. I received a bonus for this option $ 19 (minus $ 1 commission cost). Then on the second day I bought it cheaper for $ 6 (minus the commission cost of $ 1), while earning a profit of $ 11 net, which is 34% ($ 11 / $ 32) of profit in 2 days, i.e. on an annual basis it will be over 6200% .

Why did I take the maximum risk in the quotation marks in the paragraph above? Because theoretically the base instrument on which the options are based - in this case, the USO can drop to a maximum of 0. However, we had an example on oil contracts that the price can drop below 0!

Pictures below:


In this article, I am not encouraging anyone to invest and I am not recommending anything. I only share my experiences and my opinion.


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