DailyPlay – Partial Closing Trade (USO) – March 20, 2023

Partial Closing Trade

• USO – 8.92% Gain: Sell to Close 2 Contracts (or 40% of your Contracts) Jul 21st $71/$77 $63/$57 Iron Condors @ $4.15 Credit. DailyPlay Portfolio: By Closing 2 of the 5 Contracts, we will receive $830. 

Investment rationale

As you heard me say in last Friday’s webinar, unless we saw the SPX close beneath 3862 to close out last week, I remain in the belief that for right now, the market stays in a trading range of 3864 to 4148. Now, I do think that when and if we hear about more regional banks having issues like SVB or Signature Bank had, we will see the 3864 give way and then the door gets opened for a further 350-point decline. But until and if that happens, for right now, we’ll trade the range.

I do want to address the falling crude oil price, and that seeing it make the lowest low last week since late-2021 should help kick off a further decline, especially given all that new open interest that came in since the beginning of this year. (Those new oil commitments account for ~22% of all open interest.)

But – and in this case it’s a big but – the $66 level in oil has also been a major downside target since May ‘22; it’s also where the US govt. is replenishing the Strategic Oil Reserve; and last week also happened to mark an Aggressive Combo -13 signal (and the daily posted an Aggressive Sequential signal one day last week, too) along with only 12% of those polled being bullish oil right now. Despite that we have until July on our long USO iron condor, there are just too many reasons to leave the full position on. Thus, today we will exit 2 of 5 long iron condor spreads we hold, locking in but a small profit of 9% since we put this trade on, but acting upon this slew of signals we see that could give oil traders reason to hold support down in here. (And certainly, we hope they don’t, but as you know, “hope” is not a strategy.)

WTI Oil – Weekly