TP Says...
Friday, March 27, 2020
With everyone sitting at home trading, there’s been no need to use any gasoline to drive or fly anywhere.  OK, maybe not everyone is trading (though they should be).  But there seem to be fewer cars on the road, and air travel is about 10% of normal.  That’s helped to push the price of gasoline futures to their lowest prices in over 20 years a couple days ago before they bounced back a bit.  Along with gasoline, XOP, the ETF that holds oil and gas exploration and production stocks, is near its lowest price, too.  But as markets are forward looking, it would seem that the economic slowdown from the coronavirus is already priced in, and that as progress is made to contain it and get the economy rolling again, we might be seeing the bottom in energy.  Even if we don’t, the single-digit price of XOP means there’s not a whole lot of downside risk.  Plus, IV is still high enough in XOP to reward contrarian bulls.  If you are bullish on XOP, the short 6 put in the April weekly expiration with 28 DTE is a bullish strategy that has an 85% prob of expiring worthless and that generates $1.12 of positive daily theta.  That gives it a .49% daily theta return on capital.
Check out the live show at 7AM CT!
Check out luckbox Magazine
Share Share
Tweet Tweet
Forward to a Friend Forward to a Friend
Copyright © 2020 tastytrade, All rights reserved.

unsubscribe from this list    update subscription preferences 

tastytrade content is provided solely by tastytrade, Inc. and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, transaction or investment strategy is suitable for any person. Trading securities can involve high risk and the loss of any funds invested. tastytrade, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors, and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastytrade is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparison, statistics, or other technical data, if applicable, will be supplied upon request. Multi-leg option strategies incur higher transaction costs as they involve multiple commission charges. tastytrade is not a licensed financial advisor, registered investment advisor, or a registered broker-dealer.

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.