Morning Update – April 6, 2020

It’s still all about Oil. Oil is good at stealing the spotlight, and this whole week is dedicated to oil thanks to an upcoming meeting between basically OPEC+G20. All this has helped me consider a new trade. Since I’m buying and holding UNG a lot; also buying USO more recently. Why not sell some calls against this to scrape a little profit if the price falls or dances around in a range. Most certainly it limits my gains, but I do that to myself anyway.

About those covered calls, I’m thinking there are a number of equities that could be worth writing calls against as well. I’m liking SLB. Priced near $15, and $15 strike calls are selling for roughly $1.5 against May 15 expiration. That is near 10% premium, plus if there is a surprise jump in SLB from the OPEC+G20 (that’s what I’m calling it now), I stand to cover the whole thing above $150 profit. I’m not going to get excited about it, but it seems like a good trade right now. I could also sell contracts closer to expiration if I think the price may wait to jump. I limit my gains if the underlying price jumps, so not sure I want to go that route.

I’m still holding 55% of funds in UNG with an average of $13.41. If I counted my USO gains, I could apply this to my UNG average and maybe bring it down 10 more cents. I’m not sure. I’m saying this now because I must get to work. I am planning to hold my position and see what happens this week. I know one thing, if the dance continues, I’m ready to start selling calls against the shares. I’m not sure why I didn’t do this before, probably because I’m still fairly green to options. Holding for now. NG fundamentals are still holding with only slight changes in Supply/Demand. It’s more about what happens with oil this week (sadly).

Good luck