Global Energy Crisis & The USO Trade

“Everything is energy and that's all there is to it."— Albert Einstein

If you have been reading this blog faithfully over the past two years you are already driving a Tesla, so a global energy crisis probably doesn't seem like a big deal. But it is. I'll link below three articles with headlines that say it all and then offer up the trade that we have already taken in the PRO Service, but one which looks even better today than it did on Sep 27th when it went out.

An energy crisis is gripping the world, with potentially grave consequences

US Heating Oil Supplies Lowest In Decades Ahead Of Winter

Energy Crisis May Unleash Winter Blackouts Across US, Insider Warns 

USO is the United States Oil Fund ETF that tracks the price of crude oil. Buying the fund is like buying crude oil, but without the mess. We (Blue Line PRO) bought the Nov 19th $55C on Sep 27th for $1.60 ($160 per option) with USO trading at $52.90. Since, USO has traded up to $55.57. The call has traded up as high as $3.16 ($316) and closed Friday at $2.79 ($279). As of this weekend the trade is up 74%. 

USO - Long Term Trend (Weekly) 

Below is our USO Intermediate Term Trend Model for the past 12 months. For most of the move from the mid $20's to the mid $50's the model was Long and even when it flipped to Sell it didn't stay there very long. Big wins with little losses is a winning trading model and right now, USO is still in a strong uptrend. 

USO - Intermediate Term Trend

The USO Trade

USO closed Friday @ $55.57 

Option: Jan 21st 2022 $55C (4.25-4.40)  

USO is up 25% in the past six weeks. At the same rate of ascent it will reach $70 by Dec 1st and $90-$100 by the Jan 21st option expiration. The calls have the potential of reaching a 10X return. A colder than usual winter may be all it will take. On the downside the Department of Energy could release some of its strategic petroleum reserve in an attempt to temper rising oil prices. The good news in such an event would be the implied admission that oil prices are rising out of control, i.e., a panic move by the government. Yea, those always work. 


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