Oil assets are going to $0 so I am going to buy some

BY ANDREW GIOVINAZZI

November 10, 2024

Yo Pit Crazies,

To make money trading oil stocks, I have to buy them when no one wants them. Remember when oil was a give away in 2020. Exxonmobil Corp (Ticker: XOM) was $35 now $120. Frank was way out on the need to fuel the Green Economy in 2021 because we need fossil fuels to get there. Now we are back into a twilight zone of potential growth globally but an odd slowdown in the price of the big oil companies.

I will give you the case of Apache Corp (Ticker: APA) below. I was able to work into a put spread for a credit. It is a neat trick using a diagonal spread and I keep selling puts against the long put that has a longer duration. I collect the credits if all goes well or I can roll for credits.

1 year chart of APA

Just because a stock makes a 52 week low does not mean I should buy it. There is a way to trade it.

Follow this way

Investments you hold, Trades you close

That is the easiest way to differentiate between the two. If I own a stock, the big dough is in the long term compounding, dividends and income around some option sales, year after year. You make really big dough when I purchase the asset at a steep discount.

The position I had was a short APA Nov08 23.5/ 23 put spread for a credit.

My 23 puts are the long contract and I sold them for $1.60 Friday. That leaves me with the short APA Nov08 23.5s. I bought the APA Nov22 21 puts for .45. I expect to take delivery of my shares and I am stopped at $21. APA is getting close to paying a 5% dividend down here.

My end game is to get into oil stocks for lower prices and using different option strategies will help do that. That will be easy to learn here.