How To Profit From A Decline In Oil Stocks Without Getting Short | IBD | Summary and Q&A

671 views
β€’
March 13, 2023
by
Investor's Business Daily
YouTube video player
How To Profit From A Decline In Oil Stocks Without Getting Short | IBD

TL;DR

Investors can consider a bear call spread option trade for OIH, as oil stocks have taken a hit and OIH is testing support levels.

Install to Summarize YouTube Videos and Get Transcripts

Key Insights

  • πŸ•β€πŸ¦Ί OIH, the oil services ETF, has been affected by the recent financial news and turmoil, along with the decline of SVB Financial, the 16th largest bank in the U.S.
  • πŸ‚ Oil stocks, including OIH, have been trading lower across the board.
  • πŸ«₯ OIH is currently testing both its current flat base and the 40-week support line.
  • πŸ™‚ The bear call spread strategy allows traders to profit from a decline, sideways movement, or even a slight increase in OIH's stock price.
  • πŸ§” The suggested bear call spread for OIH involves selling the 335 call and buying the 340 call using the April 21st expiration.
  • 😚 The maximum possible gain for the bear call spread is the premium received for selling the spread, while the maximum loss would occur if OIH closes above 340 on the expiration date.
  • πŸ‘Ά New investors should practice with a virtual account and be aware of the complexity and risks of options trading.

Questions & Answers

Q: What strategy can investors consider for OIH in the current market situation?

Investors can consider a bear call spread strategy for OIH. This involves selling an out of the money call (335 strike) and buying a further out of money call (340 strike) to profit if OIH trades lower, sideways, or even slightly higher as long as it stays below the short call at expiration.

Q: What is the maximum possible gain and loss for the suggested bear call spread on OIH?

The maximum possible gain for the bear call spread on OIH is the premium received for selling the spread, which in this case is $80. The maximum loss would be $420 if OIH closes above 340 on the expiration date.

Q: What support levels is OIH currently testing?

OIH is currently testing the support level at its 40-week line. It has also undercut the low of its current flat base with a 336.40 entry.

Q: What should new investors keep in mind when trading options?

New investors should practice with a virtual account before risking any real money when trading options. It is important to remember that options are complex and investors can lose 100% or more of their investment in some cases.

Summary & Key Takeaways

  • OIH, the oil services ETF, has fallen below its current flat base and is testing the 40-week support line after a rough week of more than 10% decline.

  • Traders can look at a bear call spread strategy, involving selling an out of the money call and buying a further out of money call, to profit if OIH continues lower, stays sideways, or even trades slightly higher as long as it stays below the short call at expiration.

  • The suggested bear call spread for OIH involves selling the 335 call and buying the 340 call using the April 21st expiration.

Share This Summary πŸ“š

Summarize YouTube Videos and Get Video Transcripts with 1-Click

Download browser extensions on:

Explore More Summaries from Investor's Business Daily πŸ“š

Summarize YouTube Videos and Get Video Transcripts with 1-Click

Download browser extensions on: