12 Best Energy Stocks to Buy Now

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Energy Play #9: United States Oil Fund (USO)

By Michael Shulman

Long term, the price of oil is going up due to a fall in production that is outpacing the fall in demand. However, short-term trading in oil is being driven by a) the Street's misguided belief that the economy will bottom and turn around in Q4 and b) the Iranian election. If Iranian President Mahmoud Ahmadinejad is re-elected, oil prices may climb; if he loses, they may fall. So, play the momentum and buy July calls on the United States Oil Fund (USO). This is a high-risk trade that could fall apart if Ahmadinejad is thrown out of office.

And, for the serious gambler out there, if you think the Iranian presidential election, scheduled for June 12, will move oil prices drastically, you could do a mini "Black Sawn" trade. Buy both the USO July 50 Puts (USOSJ) and USO July 70 Calls (UNAGR). That will definitely impress people at your next neighborhood barbecue! Of course, you could get barbecued yourself. If the price of oil does not move sharply, you will lose on both ends.

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