How to Invest if Iran Closed the Strait of Hormuz?
If Iran actually follows through on a threat to blockade the Strait of Hormuz, it could fire up oil prices to all time highs quick.
Tensions are really high as the U.S continues to put tighter sanctions on Iran.
Iran has flexed it’s military muscle with a missile launch and a warning to the U.S to stay out of the Strait of Hormuz.
They have also stated that if their oil shipments are shut down due to sanctions, that no other oil will move through the Strait.
Is Iran just bluffing? Can the United States afford to go into the Strait and unblock it militarily if they do?
Some would say there is no way that Iran will actually go forward with blocking the Strait of Hormuz, but what if it does over the next month or two?
Is there a way to invest in a way to make money from the conflict. Now this is not something anyone wishes for, but these conflicts do happen and with tensions growing both countries are making threats and warnings which could lead to an actual conflict. If this happens and hits the news wires at CNN, CNBC and the local news channels I really believe it will be big, big news and you will see oil sky rocket.
I always like to use the ETF’s if I am going to speculate on things like metals or oil.
Today I tried something a bit different that is out of my comfort zone. I normally do not like speculating as it is like gambling and I normally always lose on these plays. But in this case, I wanted to test this out and you can give me your opinions and watch me either make money or lose money over the next 3 months on this speculative play.
I wanted to invest in BNO which is the United States Brent Oil ETF.
It is sitting at $79 per share and wanted to get 100 Shares. Instead of investing $7900 I bought the BNO out of the money $82 April call options and just 1 contract.
I am figuring if there is going to be a conflict it will happen in the next 90 days. This Option cost me $530
Filled Buy to Open 1 BNO Apr 21 2012 82.0 Call Market 5.30 – – 14:08:09 01/05/12
Now again the reason why I hate options is that right off the bat you are usually negative and I don’t understand what happened in the case of me buying this. It is already down 47% in after the first 10 minutes of buying it.
I am going to call TDAmeritrade to try to understand what happened. I do not really care at this point because if Oil does shoot up on tension I know I will make some money on this call option or I can then buy it at $82.
This may be a really stupid thing to do on my part, but I did not want to risk the full $7900 and have BNO drop to $71 and then be out $800 or more dollars. Again, this is an experiment and a completely speculative play.
If you are interested in how to buy options I can give you more information. This was a very unique situation and I have actually made some good short term trades using options with APPL Apple Stock and even NVDA.
It is just kind of discouraging when you buy an option and the same day it is worth half of what you paid for it in the case of this BNO option just purchased.
I will find out more and post the information so you can learn from my success or mistakes in the future.
I am still holding a large amount of SPXU and still think that could play out in my favor over the next month or two. Just being patient.
As always, if you have comments, suggestions or would like to do a guest post just shoot me an email.
Have a good one!
Steve
