Thursday, March 12, 2009

A stock that won't go to zero

   There are several ETFs (USO, OIL) that are designed to track the price of oil.  An interesting thing about oil is that it will never go to zero.  In fact, it is hard to believe that it will ever drop much lower than it is right now.   Given its limited downside it seems like a good defensive investment. 

12- March  USO  Debit 25.46   April 30 call  stk 26.33  option .87   IV 63

21-March  Stock is now at 30.81   Credit to close out  28.25  --gain of about 2.75.  As usual, when the stock goes up, it is always a time to wonder if covered calls are such a great idea--I would have had a gain of 5.35 without the call. 

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