In the ever-changing landscape of investing, staying ahead of geopolitical events can be crucial to making successful trades. The recent escalation of tensions in the Middle East has caused a spike in the price of crude oil, with WTI crude nearly $10 higher since the beginning of October. As an investor, it’s important to be able to capitalize on these short-term market movements.
At Extreme Investor Network, we believe that the price of oil will continue to rise in the coming weeks. One way to express a bullish view on oil is through the Energy Select Sector SPDR ETF (XLE). This ETF, which tracks energy companies in the S&P 500, can be a great way to gain exposure to the oil market without having to pick individual stocks.
With the possibility of an imminent air strike by Israel on Iran’s crude and energy facilities, traders are closely watching the situation unfold. Some suggest that up to 1 million barrels per day of Iranian production could be impacted. However, we believe that the main driver pushing crude higher in the short-term will be the fear of this conflict spreading outside of the Middle East region.
To take advantage of this potential opportunity, we recommend utilizing a call spread on XLE. By buying a $93 call option for October 18, 2024, and selling a $98 call option for the same date, investors can define their risk while still benefiting from a potential uptrend in the stock price. This spread will cost $1.40 per one lot or $140, providing a way to profit from a rise in crude oil prices without taking on excessive risk.
As with all investment decisions, it’s important to remember that there are no guarantees in the market. Before making any trades, we recommend consulting with a financial advisor to determine the best course of action for your individual circumstances. Stay informed, stay diversified, and stay ahead of the game with Extreme Investor Network.