USO JAN 17 7 LONG CALL/APR 1ST 8.5 SHORT CALL DIAGONAL
Truth be told, things like calendars and diagonals are best suited for a low volatility environment, but I'm looking for a bullish assumption setup in oil that offers me some flexibility over a larger time frame than, for example, a 45 DTE credit spread would (which is generally just a "one and done" kind of thing). As an alternative to a covered call, I'm going long-dated diagonal here since I can do it more cheaply/smaller than buying USO outright (although at 8.33 a share, it's pretty cheap to begin with).
Here's the setup, although it's off hours and the option pricing is unlikely to be accurate:
USO Jan 17 7 Long Call/Apr 1st 8.5 short call diagonal
Max Profit: Undeterminable
Buying Power Effect: $1.52 debit/contract
Notes: You want to work this setup like a covered call, leaving the long option untouched as you roll the short option to rake in credit for the life of the trade, taking the entire setup off when the amount of credits received exceeds the debit you paid to put it on by some measure. Naturally, you can also continue to work the short call for credit all the way toward long call expiration as long as it remains profitable to do so. This is why the max profit of the setup is "indeterminable" -- it all depends on when you take the trade off and how much credit you've received for it up to that point.
Here's the setup, although it's off hours and the option pricing is unlikely to be accurate:
USO Jan 17 7 Long Call/Apr 1st 8.5 short call diagonal
Max Profit: Undeterminable
Buying Power Effect: $1.52 debit/contract
Notes: You want to work this setup like a covered call, leaving the long option untouched as you roll the short option to rake in credit for the life of the trade, taking the entire setup off when the amount of credits received exceeds the debit you paid to put it on by some measure. Naturally, you can also continue to work the short call for credit all the way toward long call expiration as long as it remains profitable to do so. This is why the max profit of the setup is "indeterminable" -- it all depends on when you take the trade off and how much credit you've received for it up to that point.
Comment:
Got so busy with "housekeeping" February index setups that I didn't set this order up. May go for a setup tomorrow, but the price is likely to be different.
Comment:
Pricing on the same setup is now $1.70/contract, so will look for a fill at that price tomorrow.
Comment:
Filled for 1.73.
