Short term
Trade view / 01 June 2016 at 14:38 GMT

#SaxoStrats: USO double top suggests put spread trade

Global Head of Listed & OTC Derivatives Sales / Saxo Bank
Price target:
Market price:
Saxo Strats banner

USO, the exchange-traded fund that follows the WTI crude oil price, made a double top on the chart at $12.12/12.13 on May 26 and May 31 respectively.

Stochastics and RSI are giving a selling signal.

Let's buy the Jun16 $11.50/10.50 put spread to play a 50% retracement of the last bullish wave ($8.99/12.13 on $10.56).

USO Daily Bar Chart
Entry: Buy 10 Jun16 11.50/10.50 put spread at $0.24
=> Buy 10 Jun16 11.50 put at $0.30
& Sell 10 Jun16 10.50 put at $0.06

Maximum profit at expiry is limited
Maximum profit at expiry achieved when underlying price =< short strike price
At expiry maximum profit  = long strike price minus short strike minus premium paid
= $11.50 - $10.50 - $0.24
= $0.76

For 10 put spreads you pay a premium of $240 ($0.24 x 100 ETF x 10 lots) to receive a profit of $760 ($0.76 X 100 ETF X 10 lots) if the market closes at or below $10.50 at expiry.

Return on investment if the market closes at or below $10.50 at expiry
= profit/premium x 100
= $760/$240 x 100
= 316.66%

Maximum loss
Maximum loss is limited to premium paid
Maximum loss is $0.24, or $240 for 10 put spreads

Break even point at expiry
Long strike - premium paid
$11.50 - $0.24  = $11.26

Target: $10.50 or below

Time horizon: 16 days

USO 5-year chart
USO 5 Years Chart

— Edited by John Acher

Non-independent investment research disclaimer applies. Read more

Philidor Philidor
Hi! Have you changed your view during the last 24 hours?

You can buy the $11.50 15-day put outright now for $0.16, or a $11.5-$11 put spread for as little as 0.08. Trading costs put a bit of a dampener on the last one, before we get carried away, but still :-)
Patrice Henault Patrice Henault
No I haven't. Stochastics, RSI and MACD are bearish and my break even point at expiry is $11.26
Philidor Philidor
Sorry for the late reply. I wish there was a way to get notifications for comments.

I didn't enter this trade, and I'm not going to with the dollar on the backfoot. I'm still pretty sure oil will get its return to realities though, the question is when.


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer
- 沪ICP备13028953号-1

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail