USO , WTI crude OIL options

on 9/24 WTI crude oil dropped to $66 one of the lowest in 3 weeks.
- at this time USO is $34 and here are USO OCTober calls/puts (expire on OCT 16 th , in 25 days)
$2 away from today price of $34
- USO call strike $36 trades at 70 cents
- USO PUT strike $32 trades at 70 cents
so do a "SELL 32 PUT/BUY 36 CALL" , net cost is $0 , this is called zero-cost cylinder
USO $36 is equivalent to WTI crude future contract price of $72

$4 away from today price of $34
- USO call strike $38 trades at 35/30 cents
- USO PUT strike $30 trades at 25 cents
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OUR OWN OIL zero-cyclinder options for Insurance
- in our own simple way we can buy $7 away CALLS when OIL dropped $7 in 2 days , same way buy PUTS of $7 away when OIL raised $5-7 in 2 days.

case OIL is at $73 around 9/17 , buy $66 PUTS on that day
then on 9/23 oil dropped to $66 , buy OIL here and the same day buy $73/74 CALLS

- then use those options as insurance to SHORT when OIL raise back
- use these PUT options as insurance when OIL dropped to BUY
- instead of cashing the options use them as insurance to profit from RETRACEMETNS in OIL price after BOUNCE.

we can user Iron-condur/Butter fly strategies for our OIL options.

Trading Options With The Zero-Cost Cylinder
Zero-Cost Cylinder
In a zero-cost cylinder, a trader buys a call and sells a put, or sells a call and then buys a put, with both options out of the money. In buying the call the trader ensures involvement in the increasing price of the option. Selling the put requires that the trader buy the option at the prearranged price if it reaches that point. This strategy is designed to protect the trader from the risk that the underlying asset will fall or rise to a certain level in the future. The strike price is selected so that the premium received from the sale of the option is equal to the premium used in buying the other option. This is how the zero-cost cylinder got its name.
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Iron Condors: Wing It To Maximum Profit

An iron condor, is an advanced option strategy that is favored by traders who desire consistent returns and do not want to spend an inordinate amount of time preparing and executing trades. As a neutral position, it can provide a high probability of return for those who have learned to execute it correctly.


Most new traders are taught to execute this strategy by creating the entire position all at once, which neither maximizes profit nor minimizes risk. An alternative method is to build the position in parts and to execute the separate credit spreads in relation to price trends of the underlying security. Creating the position in this way maximizes the credit available and trades a profit range.

The iron condor creates a trading range that is bounded by the strike prices of the two sold options. Losses are only realized if the underlying rises above the call strike or fall below the put strike. Because there is no additional risk to take on the second position, it is often to the trader's benefit to take on the second position and the additional return it provides.


The best time to create either the bull put spread or the bear call spread is when the underlying has moved significantly in the direction of resistance (for the call spread) or support (for the put spread) or maintained the trend for several sessions in a row. As the underlying loses value over a period of time, buyers will obtain puts for profit as insurance against further losses. When this happens, market makers will significantly increase the cost of puts, which increases the premiums for sellers. Conversely, when the underlying increases, more buyers go long. This increases the premiums for calls and credits for the call spread.
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Spreading The Word About Portfolio Margin

With portfolio margin the farther the position is from the underlying (out of the money) security, the less likely it will incur losses, resulting in lower margin requirements. With portfolio margin, it's possible to significantly increase the return-risk ratio for spread positions than with traditional margin. The farther out of the money, the greater the reduction in margin and the greater the return enhancement at that level of risk. The following table represents the difference in margin requirements between the traditional calculation and portfolio margin for the spread examples previously mentioned.

RUT Put Spread Traditional Margin Portfolio Margin
350/340 $8,200 $2,307*
250/240 $9,850 $667*
*Calculated using April 2009 options and underlying at $390.25

Using the 250/240 spread and assuming a 15 cent per share credit, the traditional margin would result in a 1.52% monthly investment return. Using the same credit, the portfolio margin requirement would result in a return of as much as 23%, a huge reward for that level of risk.
( asr: wow 23% monthly return .. )

asr: wow for 667 is 1/4 of margin .. if you have portifoli margin account of 100k this leads to creating 10x for $6k gain . If we wait say for 20 days for $6k gain , we can keep $100k in portfolio account and for Risk 250/240 is 100 points away from the current trading of 390 ( seems Russel 2000 index options?).
Research this further
asr: shricapital etc. guys may be using this kind of strategy for consistent profits.

Using the 250/240 spread and assuming a 15 cent per share credit, the traditional margin would result in a 1.52% monthly investment return. Using the same credit, the portfolio margin requirement would result in a return of as much as 23%, a huge reward for that level of risk.

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FSLR 110-130-150 Call Butterfly
(see picture explains better )
The trade displayed in Figure 1 involves buying one 110 call, selling two 130 calls and buying one 150 call. As you can see, this trade has limited risk on both the upside and the downside. The risk is limited to the net amount paid to enter the trade (in this example: $580).

The trade also has limited profit potential, with a maximum profit of $1,420. This would only occur if FSLR closed exactly at $130 on the day of option expiration. While this is unlikely, the more important point is that this trade will show some profit as long as FSLR remains between roughly 115 and 145 through the time of option expiration. (Be sure to check out the Buying Options section of our Simulator How-To Guide to learn how to buy options like these.)