Novice Trade: OIH ETF

The Trade: Buy one OIH August $27 call for a one-point debit. 

(OIH) is the trading symbol for the VanEck Vectors Oil Services ETF.

For further detail on OIH, see the VanEck Vectors website. 

The stocks held in OIH are the best of breed of the oil-services sector. Schlumberger (SLB) and Halliburton (HAL) comprise over one-third of OIH. Some other names are Baker Hughes BHGE , Helmerich & Payne (HP) , Transocean (RIG) and National Oilwell Varco (NOV) . OIH is comprised of a total of 26 stock holdings.

OIH has a current annual dividend yield of 2.5%. OIH has a history of trading ex-dividend one time per year, that period being in the latter part of December.

OIH over the past 52 weeks has traded between $21.70 and $29.87. That high was made one month ago on May 21. Today, OIH trades around the median of those two ranges.

Technically, OIH has formed into my "washout pattern." That pattern continues to be my most efficacious for this market, the one which began in late January.

Note that the recent pullback in the energy commodity markets catalyzed the selling in OIH over the past month, doing that as OIH was making a 52-week high. Over the past month, profit-taking has moved OIH down over 12%.

The trade tactic I prefer now for OIH is the out-of-the-money long-call shooter expiring in August. This is a very high-risk trade due to various factors, the primary ones being the call is out-of-the-money and the time to expiry is 57 days. Thus, best to use only highly discretionary capital if taking the trade.

The trade is as follows:

Buy one OIH August $27 call for a one-point debit.

The suggested target to close for a gain is a bid of $1.50 and the suggested stop-loss target is a bid of 50 cents. Best to scale into the position using limit orders.

At the time of publication, Skip Raschke had no position in the securities mentioned.