Oil Hits 2.5-year High. Plus Ride the Bull With QQQ Calls
The Keystone Pipeline sprung a leak, spilled 5,000 barrels of crude oil in South Dakota, and has been shut down … along with the 590,000 barrels of oil a day that has been flowing through it.
This, by the way, is not the Keystone XL Pipeline — a controversial project that Trump approved earlier this year.
As a consequence of the shutdown, oil prices jumped 2% on Wednesday to $58.09. That’s the highest level since July 2015.
Oil prices had already been on the rise, and this incident just adds more fuel to the oil rally. That’s because one-fifth of Canada’s oil is transported to the U.S. via the Keystone Pipeline.
We’re talking about a temporary, but serious, supply withdrawal.
Moreover, all the members of Organization of the Petroleum Exporting Countries are meeting on Nov. 30. And they are widely expected to extend their production curbs.
In short, the backdrop for higher oil prices is very favorable. And this should translate into a higher price for your Vanguard Energy ETF (VDE) shares. Those are currently trading right around the price where you added them, but likely won’t stay there for long. Continue to hold.
A New Bet to Make Today
Oil isn’t the only asset with strong momentum behind it. I’m talking about the stock market in general.
As you know, I’ve been quite cautious about the stock market, But now that the Federal Reserve released its minutes from its last meeting, another interest rate hike doesn’t appear to be in the cards anytime soon.
That friendly monetary tailwind should keep the bull market rolling through the end of the year. In fact, it wouldn’t surprise me to see one whale of a Santa Claus rally.
Much has been said about both the age and the strength of the bull market. But the current rally is far from the oldest or the strongest. In fact, the 1990-to-2000 rally makes the current rally look quite tame.
The next major jobs data release will be on Friday, Dec. 8. And if the numbers come in better-than-expected, we should see a new high for the stock market.
The best way to play that bounce is to buy some call options on the Nasdaq-100 index. Here’s what to do:
Using 5% of the funds you have allocated to this service, BUY to open the PowerShares QQQ Trust (QQQ) December 15, 2017, call options with a strike price of $155.00, symbol QQQ171215C00155000, at the market to open.
QQQ last closed at $155.69, and these call options last traded at $2.09. Since these options are “in the money” by 69 cents, that means that you are only paying $1.40 for the three weeks of time.
Speaking of Smart Moves to Make …
By the way, our decision to sell our Brazil ETF shares — for a tracked 12.8% gain — looks like a good one. Hopefully they’ll fall far enough for us to re-buy and go for another round of gains.
For now, sit back and wait.