In the article, “Bearish on Oil Stocks?“, we outlined a bearish strategy for oil stocks for the next few months. We continued the oil saga in November and every position selected was fully profitable returning an average of +6.2%.
We still consider a bearish strategy on oil stocks to be potentially lucrative, and on November 28, 2006 we searched for bear call credit spreads stock options positions for oil company stocks with all options expiring on December 15, 2006 and found the following positions:
| SmartSearchXL search on November 28 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock Sym |
Stock Price |
Sell Option |
Expire &Strike |
Bid | Buy Option |
Expire &Strike |
Ask | %Return | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| OXY | 48.29 (+0.44) | OXYLJ | 06 DEC 50.0 (18) | 0.45 | OXYLK | 06 DEC 55.0 (18) | 0.05 | 8.70 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| VLO | 53.11 (+1.23) | VLOLK | 06 DEC 55.0 (18) | 0.60 | VLOLL | 06 DEC 60.0 (18) | 0.10 | 11.10 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SU | 77.57 (+1.44) | SULP | 06 DEC 80.0 (18) | 1.25 | SULR | 06 DEC 90.0 (18) | 0.10 | 13.00 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Three attractive positions were found, OXY, VLO and SU, with all of the positions having potential returns in the +8 to +13% range with only 18 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 OXY bear call credit spreads position will be profitable as long as the price of OXY is below $50 at options expiration.
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[tags]bear call credit spreads, investment strategy, iron condor, option income, poweroptions, selling naked puts, stock option trading, stock options[/tags]