How to trade the jump in oil and energy stocks using options

Posted By: EN Todayon: October 04, 2024In: General Energy News, Oil & Gas News

Geopolitical tension continues to escalate in the Middle East. Crude oil is nearly $10 higher since October officially kicked off. I believe the price of WTI crude will push even higher in October. I want to use the 2024 lagging Energy Select Sector SPDR ETF (XLE) as way to express my short-term bullish view on the price of oil. XLE YTD mountain Energy Select Sector SPDR, YTD Oil markets are measuring the possibility of an imminent air strike by Israel on Iran’s crude and energy facilities. This potential reaction by Israel is due to Iran’s missile strike earlier this week. The trade Traders suggest that roughly 1 million barrels per day of Iranian production could come off line. However, I believe that would not be the main driver to push crude higher short-term, in would be the fearful reaction of this war spreading outside the Middle East region. I want to buy XLE and utilize a call spread to define my risk. Bought XLE $93 10/18/24 call option for $2.10 Sold XLE $98 10/18/24 call option for $0.70 This spread will cost an investor $1.40 per one lot or $140 XLE was trading roughly $92.75 when this spread was bought DISCLOSURES: ( Long XLE , long this call spread in XLE) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.