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Thursday, January 20, 2011

Inflation Trade

If you believe that inflation is going to pick up in the next year or so, heres a trade to take advantage of it.

Short 1 Jan 12 XLE 55 put for a $2.60 credit

Buy 1 DBA Jan 12 30/35 call spread for a 2.45 debit

Net costs: .15 credit.

Max Profit: $515 (3,400%)  if DBA is over 35 and XLE is about 55 in 11.5 mos. This trade can be closed anytime as well.  If DBA is lower than 30, but XLE stays above 55, then the max profit is the .15 credit received from the start.

Update: This trade is now trading for a 1.56 credit which is a 1,000% gain


Ben said...

Initiated in my virtual portfolio.

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