E Oil Services ETF (OIH) Offers Potential 51.52 % Return In 18 Days For Bullish Traders

The energy sector has had a great run since early April and that has flowed through into the Oil Services ETF – OIH which rallied from $23 to nearly $30 in the space of just over one month.

Since then, the ETF has had a significant pullback, dropping 9.24%.

With the stock pulling back towards the rising 50 day moving average, this could provide bullish investors with a nice entry point.

One trading opportunity for those traders with a bullish bias is a Bull Put Spread using the $27 strike as the short put and the $26 strike as the long put.

As of May 28th, this trade offered a 51.52% return on risk over the next 18 calendar days when using the June 15th expiry.

With the rising 50 day moving average currently around $26.40, this trade represents a good risk/reward for those betting that OIH will stay above this line in the sand.

The maximum profit on the trade would be $34 per contract with a maximum risk of $66. The spread would achieve the maximum 51.52% profit if OIH closes above $27 on June 15th in which case the entire spread would expire worthless allowing the premium seller to keep the $34 option premium.

The maximum loss would occur if OIH closes below $26 on June 15th which would see the premium seller lose $66 on the trade.

The breakeven point for the Bull Put Spread is $26.66 which is calculated as $27 less the $0.34 option premium per contract. Keep in mind that due to the bid-ask spread, you may not be able to get filled at these prices.

(Click on image to enlarge)


Looking at the chart above, if the ETF broke below the 50-day moving average, this would be a good place to place a stop loss and close out the trade.


Disclaimer: The information above is for educational purposes only and should not be treated as investment advice. The strategy presented would not be suitable for investors who are ...

How did you like this article? Let us know so we can better customize your reading experience.


Leave a comment to automatically be entered into our contest to win a free Echo Show.
Michael Molman 2 years ago Contributor's comment

Interesting thoughts on $OIH I have been looking for more opportunities in the energy sector.

Bruce Powers 2 years ago Member's comment

Anything catch your eye yet?

Michael Molman 2 years ago Contributor's comment

Yes $LNG and $KEX are two of my favirote holdings I have had them for a while. I believe the best opportunities can be found in the midstream energy sector.