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Mike Khouw: How To Manage A Losing Trade In The U.S. Oil Fund ETF

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It is important for a trader to know what to do when price doesn't go in the right direction. CNBC Options Action's Mike Khouw found himself on a bad side of a trade recently as he recommended a bullish strategy in United States Oil Fund LP (ETF) (NYSE: USO) on November 7.

He explained that he tried to catch a falling knife in crude oil and got hurt, but said there are still things that can be done to reduce costs while waiting for a turnaround.

If the ETF closes below $28 on January expiration, he will have to take a long position.

In the meantime, he wants to sell January 28 calls for $0.40 to reduce his cost.

Khouw added that commodities are mean reversing and by selling calls against a long position over time, it is possible to reduce the loss.

 

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Posted-In: CNBC Mike Khouw Options ActionOptions Markets Media Trading Ideas

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