This could be a 50:1 play. Even a 750:1 play if the price of oil were to skyrocket.
What you are looking at is the price of a Proshares ETF named DIG which is supposed to move at 2X the price of oil. It doesn't and does have decay problems but the correlation in price movement between it and OIL was actually very good within -3% to 5%. So if oil jumped 25%, DIG would jump a minimum 20%.
Right now the price on a $9 Strike with a Sep 18, 2020 expiry is listed for $25 / contract or $0.25 / share.
finance.yahoo.c...ote/DIG/options?p=DIG&...
Oil MUST stay below $30 for these to remain OTM (Out of the money).
What about there being no OPEN INTEREST on these contracts. What people do not know about Options is the OCC MUST offer you the intrinsic bid on any contract even if open interest is 0 - and execute the contract at any time you which to close it. Very few people know this.
Now in the hypothetical situation where a supply disruption due to geopolitics occurs and oil goes to $200 and lets say that the ETF matches and just goes to $200, what happens to these contracts? They would be $191 in the money and therefore would sell for $19,100 / contract that you bought for $25 (add a dollar for the purchasing fee). That would be a 750:1 return on investment.
Dangers? Its sibling ETF 3X OILU just went to $0.02 and is being de-listed tomorrow. But! Because of the high volume ingesting INTO DIG as it sold off I think this one will survive and bounce back hard.
As the nomenclature warns - only invest risk capital.
What you are looking at is the price of a Proshares ETF named DIG which is supposed to move at 2X the price of oil. It doesn't and does have decay problems but the correlation in price movement between it and OIL was actually very good within -3% to 5%. So if oil jumped 25%, DIG would jump a minimum 20%.
Right now the price on a $9 Strike with a Sep 18, 2020 expiry is listed for $25 / contract or $0.25 / share.
finance.yahoo.c...ote/DIG/options?p=DIG&...
Oil MUST stay below $30 for these to remain OTM (Out of the money).
What about there being no OPEN INTEREST on these contracts. What people do not know about Options is the OCC MUST offer you the intrinsic bid on any contract even if open interest is 0 - and execute the contract at any time you which to close it. Very few people know this.
Now in the hypothetical situation where a supply disruption due to geopolitics occurs and oil goes to $200 and lets say that the ETF matches and just goes to $200, what happens to these contracts? They would be $191 in the money and therefore would sell for $19,100 / contract that you bought for $25 (add a dollar for the purchasing fee). That would be a 750:1 return on investment.
Dangers? Its sibling ETF 3X OILU just went to $0.02 and is being de-listed tomorrow. But! Because of the high volume ingesting INTO DIG as it sold off I think this one will survive and bounce back hard.
As the nomenclature warns - only invest risk capital.