Which Way Wednesday – Hurricane Edition

Hurricane Laura is coming.  

It's a good excuse to get Oil (/CL) back to $43.50 but it makes a nice short there as nothing else is going on in the energy market to prop it up.  We do have a holiday weekend approaching (next Friday) but driving is mostly off the table this year and, for oil, I'm a lot more concerned with the Dollar bouncing back from it's -10% position and kicking oil's ass after Powell's speech tomorrow at the Jackson Hole conference.  

While the Dollar deserves to be weak, it's weak relative to what?  All the other countries are printing money too – maybe not as fast as we are but the US Dollar is 60% of all the World's currency so, if we are debasing it, we'd have to debase it twice as hard as the Euro (30%) to fall as fast. 

Europe has indeed spent about half of what we've spent on stimulus but they've spent it much more effictively and seem to be getting their virus under control.  Japan has spent the most, by far and the Yen is another major currency the Dollar is measured against so why should the Yen be higher against the Dollar?  It makes no sense, so the Dollar is probably too weak now and a move back up in the Dollar to 96 will likely knock commodities and stocks down about 5%.

While I prefer to short the Oil (/CL) Futures at $43.50 with very tight stops over that line, we can also make the simple bet that oil won't be over $50 in April by picking up the following bearish spread on USO:  

• Buy 20 USO April $35 puts for $6 ($12,000) 
• Sell 20 USO April $30 puts for $3.15 ($6,300)
• Sell 10 USO Sept $30 puts for 0.52 ($520) 

If USO goes below $30, we need to take a loss on the short Sept $30 puts but, if not, we can sell those puts for 0.50 each month and collect $2,000 more through January.   As it stands, the net of the spread is $5,180 and it's $8,000 in the money at $31 to start.  If we…

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