84% PoP - Playing the Oil Prices with /MCL Futures $USO $CL

12 Nov 2023

I've decided to make a play on the oil prices and chose /MCL futures for this venture. The trade required a BP (buying power) of $600, with a maximum profit potential of 1.07cr. This sets up a favorable risk-reward ratio of 1:6. The IVR (Implied Volatility Rank) stands at 51, which is advantageous for the credit strategies I prefer. With a PoP (Probability of Profit) of 84%, the conditions seem ideal for the 34 days duration I've set for selling the 70 put leg.

I opened an semi-bullish position with a put short on the January expiry /MCL futures. My expectation is that the oil prices will either not fall too rapidly or will actually rise. For future management of this position, I have two scenarios in mind:

If the Oil Continues to Fall Strongly: In case the oil continues its strong downtrend, I plan to sell a call leg on top, transforming the position into a strangle from the current naked put. If the fall is steep, or I fear that the break-even point of $69 might be breached, I'll hedge my risk by purchasing a put around the 60 strike, turning it into a credit spread and wait for the 21 DTE (Days to Expiry).

Stagnant or Slight Rebound in Oil Prices: If the oil price doesn't move much or rebounds slightly, I'll quickly close my position for a profit. The target? About 50% of the original credit received for writing the put, which amounts to roughly $50. This would mean a 10% return on my utilized capital, which I find quite satisfactory.

In summary, this strategic move in oil futures trading is well-aligned with my risk appetite and trading preferences, providing a good balance between risk management and profit potential.

15 Nov 2023

Nota

5 days later I've sold the 85 CALL leg for additional 0.8cr, now I have a strangle, 29 days left.
IVR os 55.4, now $187 on the table, no additional buying power required.

16 Nov 2023

Nota

ROLLING + LEGGING OUT
Very bearish candle. I'ts time to reducing this trade's risk:

1/ I've rolled down the call side to strike 80,
2/ and legged out the put side at strike 60 with a PUT leg buy.

With this step I have now $214 on the table.

20 Nov 2023

Nota

Rolling up the short put leg from strike $70 to strike $72 for 0.33 additional credit.
I have now 2.47cr on the table and 24DTE left.

28 Nov 2023

Nota

SMALL PROFIT AND CLOSE

16 days left to expiry, IVR didn't decreased since I've opened this position (now the IVR is 64...)
I've closed the whole custom setup for 2.28db, so I've realized a solid $19 profit on this trade without fees.