This entry is a re-hash of a post that I read on iBankCoin.  Written by JimPunkrockford.  Please direct credit for this trade to him.  I'm simply a spreadsheet junkie that took his trade and turned it into this.

You may have noticed that the title of this entry is in quotes.  The reason for this is that long-term typically means 5+ years.  However, with the market volatility we've seen lately I think it's appropriate to consider a one year trade "long-term."

Key aspects of this buy/write trade:

1) Futures markets are betting oil will go higher
2) You are not making a downside bet against oil
3) Go long USO
4) Sell a call option that gives speculators rights to your shares of USO
5) Selling the call will give you 25% protection to the downside of oil
6) As long as oil stays above ~$33/BBL the trade is profitable
7) If at expiration, oil is above $44/BBL you will get called and you get to keep the call premium.

This looks like a great trade.  The thing to keep in mind is that you will be locking up capital for over a year.  Should you need the money before then it could be expensive for you to unwind the trade.
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