I'm considering selling some puts on USO 6-12 months out. I'm trying to determine what price oil would be at if USO were 1 or 2. USO at $6 and WTI at $27, would a USO price of $1 be equal to 1/6 of 27? Or is there no way to calculate that? Could USO ever be liquidated if it goes too low? I'm thinking if I bought USO at $1 and it fell, could it be liquidated at 40 or 50 cents?
Do you really think CL will drop below 30 for long? The only country that can operate on dollar store margins is Saudi Arabia. Oil needs to be over $40/barrel for America to even think about going after our own stores. It's even worse for the oil sands people in Canada. I'm extremely long USO in 12 months. This oil war can't go on for long without pissing off a lot of powerful nations and Coronavirus has already been priced in (the drops in december/january). I have USO pegged at $15 by january 2021. A hunch. The only thing that could possible crush that tea leaf prediction is airlines going belly up. The big tell will be summer. If most quarantines are lifted, travel will resume en masse (cheap tickets baby!) and oil should rise predictably. To answer your other question - USO holds a basket of oil. It's possible it could be liquidated by it's managers but the drop would have to severe enough to do a lot of damage to oil as a whole. If you took 5 minutes to read the prospectus: Moreover, your math is a little wonky...again from the prospectus: In summary KNOW WHAT YOU ARE INVESTING IN BEFORE SPECULATING.
That’s why I’m asking. I understand one could lose their total investment. I’m just trying to get a general idea on what price WTI would be if USO were 1 or 2. Maybe it’s not possible to determine.
OP looking at Jan 2021 put option expiry put prices. what are you considering 1 contract, 10, 100? ATM $4 put has approx $0.77 premium & if you are bullish,you win. Below $3.23 you're on the hook - how far below $3.23 is an unknown. Max risk $4 - $0.77 = $3.23. Also consider a time decay play ... with USO floating between $3.50 - $5,what will the option be worth in September/October. You could also do a spread - sell to open the $4 for $0.75, buy to open the $3.50 pay $0.55. In the right direction you make $0.20, in the wrong direction sub $3.50 you lose $0.30.
Using YTD, both WTI & USO have dropped approx 64% Lets take WTi at ~$20, with no further OPEC production cuts - by August WTI drops 20% to $16,USO should follow $4.22 x 80% = $3.375 Work it from there,is there a bottom,will the economy recover to get oil back up close to $30+, also consider is it possible USO could reverse split/consolidate or close up shop? There really is no answer to your question of where oil or USO will be 6-12 mths from now.
Of course there is no way to know where oil will be. You used the same rough calculation that I do to figure an approximate USO price.
Yes, actually owned a little RDS when it was in the 50s. Sold for a tiny loss right before the big drop. Kicking myself for not nibbling when it hit 19. PSX has been on my radar for a while too, but really have no specific knowledge on what a good entry point would be for either.