Bearish Strategies for Oil

D

DataCruncher

If one believes that the price of oil will drop, what are some good ideas of options to use? This would be for a non-futures contract financial instrument. Perhaps USO unless I can find something better.
I am worried that the implied volatility of puts is too inflated however.
 
I want a pure play on the price of oil. DUG is a group of oil and gas companies that are affected by oil. But then you have to get into analyzing how profit margins of those companies change.
 
Interesting opinions he makes and I am sure some of it is fact based. The problem is they're just opinions. Thanks for the link!
 
Quote from DataCruncher:

If one believes that the price of oil will drop, what are some good ideas of options to use? This would be for a non-futures contract financial instrument. Perhaps USO unless I can find something better.
I am worried that the implied volatility of puts is too inflated however.
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One thought would be to keep an eye on the puts. When and if they become NOT inflated, that's the time to buy.

That's the best time to buy puts partially because you would not be overpaying. But even more important, the puts deflating would be a sign that bears had capitulated. Once that happens, a big drop cannot be far behind.

Admittedly that may not happen. But if it does, you have yourself a high-probability play.
 
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