The price of oil and the price of gasoline have decreased significantly in the last few months. The price of oil and gas at the pump are somewhat cyclical as the price tends to rise in the summer months with more vacation driving, etc. (higher demand) and falls in the winter months with less driving (lower demand).
Using this trend, a bear call credit spreads strategy may be a winning stock options strategy in the next few months as the prices of oil stocks tend to mirror the prices of oil and gasoline. Note: Some pundits believe that oil and gas prices will stay low until the November elections in the US then rise again. OPEC has rumored that they may slow production to control supply and raise prices.
Using PowerOption’s SmartSearchXL stock options strategy search tool, the following oil stock options positions were found on October 9, 2006 with stock options expiration on October 20, 2006:
| SmartSearchXL Search Results On October 9 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock Sym |
Stock Price 10/9/06 |
Sell Option |
Expire &Strike |
Bid | Buy Option |
Expire &Strike |
Ask | %Ret | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| VLO | 50.69 (+0.05) | VLOJK | 06 OCT 55.0 (12) | 0.25 | VLOJY | 06 OCT 57.5 (12) | 0.10 | 6.4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SU | 69.20 (+1.02) | SUJO | 06 OCT 75.0 (12) | 0.35 | SUJP | 06 OCT 80.0 (12) | 0.10 | 5.3 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PTR | 105.61 (-0.17) | PTRJB | 06 OCT 110.0 (12) | 0.35 | PTRJC | 06 OCT 115.0 (12) | 0.10 | 5.3 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| KWK | 32.23 (+0.25) | KWKJG | 06 OCT 35.0 (12) | 0.30 | KWKJH | 06 OCT 40.0 (12) | 0.05 | 5.3 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Analysis
Four positions were found with a probability of success greater than 80%, VLO, SU, PTR and KWK, with all of the positions having potential returns in the +5 to +6% range with only 12 days until stock options expiration. These potential returns will be fully realized provided the price of stock is below the short option on options expiration day. For example, the VLO bear call credit spreads position will be profitable as long as the price of VLO is below $55 at options expiration.
PowerOptions provides a free 14-day trial of its service. So join PowerOptions today, and you too can start reaping the benefits of the oil and gasoline bear call credit spreads investment strategy.
PowerOptions provides Internet based tools for analyzing stock options with specific search criteria and for finding potentially lucrative option income. For those seeking to execute a bear call credit spreads investment strategy for their personal portfolios, PowerOptions provides an Internet based search engine for finding potentially lucrative income producing bear call credit spreads stock options positions.
[tags]stock options, bear call credit spreads, investment strategy[/tags]