I put a great long-term trade on XLE yesterday. I'm inviting you to copy and join with me.
Are you as confident and bullish on XLE as I am? The energy sector has a lot of room to grow. Lots of profits while oil prices are so high. And when Biden and Putin are retired to their prisons, the energy sector will lead the world recovery.
Meanwhile, the P/E ratio for major energy companies is close to 10.0. This is still absurdly low.... historical average is 30, and the current S&P average is 19.65. XLE price should double -- just to get back to the low side of normal.
The sector is only suppressed due to woke investing policies, and that's already starting to break apart. Pressure from several US state governments divesting their pensions from Blackrock holdings is having a huge impact.
More aspicious signs -- high demand during winter. election. etc. XLE shook off the market panic of Tuesday on the next trading day, proving how robust the sector is. It didn't drop below support during the panic, to begin with.
Here's my trade. I bought March calls for a delta of 100, to mimic holding 100 shares. Then I sold covered calls to expire in two weeks. I'm going to hold this for a month and evaluate. I reasonably expect to make $1000, more or less.
Here's the set-up:
At 11:30, XLE is trading at 90.5, same when I bought yesterday.
Open option chain for March 17. Find option with delta of 0.6 (it will be slightly in the money). Currently, this is at strike 85 (that's what I bought yesterday). Trading about close to $10.0. So $1000 for one contract. (I bought two contracts, but you can pick your own position).
With two contracts, my delta is $120 profit for each $1 increase in XLE, which is close to the 100 shares equivalent that I was looking for. I have $2000 and change invested in the position. I expect to make $800 to $1200 by early December.
When you have purchased the option(s), you now control 100 shares per contract. You can sell covered calls on these options. You can skip this trade if it's too complicated to track, but you know how covered calls work. And "fifty bucks is fifty bucks."
Keep these short -- one or two weeks. I sold Nov. 18 options. Always look for the option with a delta of 0.1, and verify that this looks high enough to give you just 10% or so chance of getting called out. We don't want to be forced to unwind the position before we want to.
I sold Nov. 18 options at strike 99, currently trading at .26.
The cash from the covered call will pay for the time decay on the long options.