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Posts Tagged ‘OIL’

List of Options Which Trade After Hours (Until 4:15)

Tuesday, May 31st, 2016

Some time ago, I noticed that the value of some of our portfolios was changing after the market for the underlying stock had closed. Clearly, the value of the options was changing after the 4:00 EST close of trading. I did a Google search to find a list of options that traded after hours, and came up pretty empty. But now I have found the list, and will share it with you just in case you want to play for an extra 15 minutes after the close of trading each day.

Terry

List of Options Which Trade After Hours (Until 4:15)

Since option values are derived from the price of the underlying stock or ETP (Exchange Traded Product), once the underlying stops trading, there should be no reason for options to continue trading. However, more and more underlyings are now being traded in after-hours, and for a very few, the options continue trading as well, at least until 4:15 EST.

Options for the following symbols trade an extra 15 minutes after the close of trading – DBA, DBB, DBC, DBO, DIA, EFA, EEM, GAZ, IWM, IWN, IWO, IWV, JJC, KBE, KRE, MDY, MLPN, MOO, NDX, OEF, OIL, QQQ, SLX, SPY, SVXY, UNG, UUP, UVXY, VIIX, VIXY, VXX, VXZ, XHB, XLB, XLE, XLF, XLI, XLK, XLP, XLU, XLV, XLY, XME, XRT.

Most of these symbols are (often erroneously) called ETFs (Exchange Traded Funds). While many are ETFs, many are not – the popular volatility-related market-crash-protection vehicle – VXX is actually an ETN (Exchange Traded Note). A better way of referring to this list is to call them Exchange Traded Products (ETPs).

Caution should be used when trading in these options after 4:00. From my experience, many market makers exit the floor exactly at 4:00 (volume is generally low after that time and not always worth hanging around). Consequently, the bid-ask ranges of options tend to expand considerably. This means that you are less likely to be able to get decent prices when you trade after 4:00. Sometimes it might be necessary, however, if you feel you are more exposed to a gap opening the next day than you would like to be.

How to Play Oil Prices With Options

Sunday, February 8th, 2015

If you are anything like me, I have enjoyed filling up my car lately.  It almost seems too good to be true. How long do you think gas prices will stay this low?    I figure that the price is more likely to move higher from here than it is to move lower, but I could be wrong.  It seems like a prudent bet would be that it won’t move much lower from here, and that the price of oil is more likely to stay the same or move higher over the next year.  If either scenario (flat or up) is true, you can easily double your money using options.  Today I will show you one way that might be accomplished.

Terry

How to Play Oil Prices With Options

If you want to bet on higher oil prices, you might consider buying the ETF (Exchange Traded Fund) OIL.  This is simply a measure of the price of crude oil.  I don’t like to trade OIL, however, because the price is too low (under $12) to have meaningful option prices (and the options market is not very efficient which means it is hard to get decent prices because bid-ask ranges are too high).

An alternative ETF is OIH.  This covers the oil service companies, like drillers and transporters.  There is an extremely high correlation between the prices of OIL and OIH, and OIH has the advantage of having a higher absolute price ($35.50 at Friday’s close) and a more efficient options market (including weekly options and LEAPS).

Check out the chart for OIH for the last year:

OIH Historical Chart Feb 2015

OIH Historical Chart Feb 2015

If you had been smart (or lucky) enough to buy OIH when it rose above its 30-day moving average a year ago, you might have owned it while it rose from about $46 to about $55 when it fell below its 30-day moving average and then if you sold it short, you might make gains all the way down to $36 (you would have had to resist buying it back when it briefly moved above the moving average a few months ago).

Now OIH is well above this moving average and this might be a good time to make a bet that it will move higher going forward.  If you wanted to bet that the price of oil (and OIH) will remain flat or move higher, you might consider these trades (with OIH trading at $35.50):

Buy 3 OIH Jan-16 35 calls (OIH160115C35)
Sell 3 OIH Mar-15 36 calls (OIH150320C36) for $3.05 (buying a diagonal)

Buy 1 OIH Jan-16 35 call (OIH160115C35) for $4.45

These prices are at $.05 more than the mid-point between the bid and ask prices for the option or the spread.  You should be able to get those prices – be sure to enter it as a limit order because bid-ask ranges are a little high (although narrower than they are for OIL).

If you got those prices, your total investment would be $915 plus $445 plus $5 commission (Terry’s Tips commission rate at thinkorswim) for a total of $1365.

This is the risk profile graph for these positions when the March calls expire on March 20:

OIH Risk Profile Graph 2015

OIH Risk Profile Graph 2015

The graph shows that if the price of OIH ends up in a range of being flat or moving higher by $3, the portfolio should gain about $300, or about 20% for the six weeks of waiting.  The nice thing about owning options is that you can make this 20% even if the ETF doesn’t go up by a penny.  If you just bought OIH instead of using options, you wouldn’t make anything if the ETF didn’t move higher.

Even better, if OIH falls by a dollar, you still make a profit with the options positions.  If you owned the ETF instead, you would lose money, of course.

Owning an extra uncovered long Jan-16 35 call gives you upside protection in case OIH moves dramatically higher.  It also leaves room to sell another short-term call if OIH drifts lower instead of remaining flat or moving higher. Such a sale would serve to reduce or eliminate a loss if the ETF moves lower.

When the March calls expire, you would buy them back if they are in the money (i.e., the ETF is above $37) and you would sell Apr-15 calls at a strike slightly above the current ETF price.  You should be able to collect a time premium of about $100 for each call you sell.

There will be 10 opportunities to sell one-month-out calls for $100 before the Jan-16 calls expire.  Once you have collected $100 for each of 3 monthly calls you sell, you will have all your original investment back, and further  sales are clear profit.  As long as the Jan-16 calls are in the money when they are about to expire, you would collect additional money from those sales as well.

This strategy involves making trades around the third Friday of each month when the short-term short options are about to expire.  That could be a pain in the neck, but to my way of thinking, it is a small price to pay for the possibility of doubling my money over the course of a year.  There is a variety of other option strategies you might employ, but this one makes good sense to me.

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