I have a substantial bearish position on the energy fund XLE (long December 17 2021 puts). It was distressing this morning to see what XLE was doing before the market opened this morning. Thanks to the OPEC cartel, crude oil was raging higher, and so too was XLE. I wondered if I should just give up on my XLE puts and be done with it.
The headlines weren’t any more encouraging.
But I took a fresh look at a longer-term chart, since, let’s face it, minute bars including after-hours data aren’t exactly great foundations for decisions when you’re dealing with options that don’t expire for six weeks. As shown below, the rationale for the position was still intact, even with the big bump higher. The market opened, XLE was substantially higher, but I stuck with my positions, simply based on the fact that in a larger context, the lift this morning didn’t ruin my logic behind the position.
Well, mercifully, our dear friends at OPEC didn’t succeed in pushing oil to $300 per barrel, and the push in prices unwound just as quickly as it went up. It was a perfect inverted “V”.
Thus, XLE slavishly tagged along.
I’ve mentioned the long-term $XOI and XLE charts many times in recent weeks. This, to me, remains the cleanest, safest, and most appealing bearish position in the entire stock market. I stuck by it, and Lord willing, it’ll pay off handsomely. I just wanted to share my little hand-wringing session this morning as a lesson in keeping an eye on the bigger picture.
