Editor’s Note: Jim Pearce’s approach above — sizing up a trade precisely, holding through the run, and recognizing the exact moment to pivot — is the same discipline he’s brought to Personal Finance for over a decade. His latest briefing applies that same framework to one of today’s most debated investment questions. See the briefing →

Lately, I’ve been writing a lot about profit windows. That’s the term I use for stock market trades that are driven more by current events than by long-term fundamentals.

For example, on July 6, I explained why “This Kalshi Inspired Oil Trade is a Bet Worth Making.” At that time, the price of crude oil was bottoming out around $70 a barrel after rising above $115 in April.

However, I was concerned that oil traders were too optimistic that the war in Iran would soon end. I said then, “While officials from Iran and the United States were meeting last week in Qatar to iron out their differences, Iran’s Foreign Minister warned Israel that an attack on his country by them would trigger an ‘immediate powerful response.'”

I further opined, “I hope that doesn’t happen. But if it does, I don’t want my investment portfolio to take a big hit because I acted on emotion instead of reason.” For that reason, I suggested buying a call option on the ProShares K-1 Free Crude Oil ETF (CBOE: OILK). A call option increases in value when the price of the underlying security goes up.

To that end, I noted, “Last week, while OILK was priced a little under $47, the call option that expires on November 20 at that strike price could be bought for $4. That makes the breakeven price on this trade $51.”

My reasoning was simple: “If the Strait of Hormuz closes again and oil prices skyrocket, I could double or triple my money on this trade.”

Perfect Timing

Turns out, my timing was close to perfect. From that day forward, the price of oil started rising. Last week, it crested above $100 a barrel after the Trump administration doubled down on bombing its way out of a diplomatic impasse.

At the same time, OILK kept rising in tandem with oil prices. By late last week, it was trading above $56. Had you bought shares of OILK instead of the call option I recommended, your gain would be a little over 20 percent.

As for our call option, it was trading at a bid/ask of $8.80/$10.70. The midpoint of that range, $9.75, equates to a gain of 244 percent on our $4 entry price. That is more than ten times the return on the underlying equity.

That option still has ten weeks to go until it expires. If crude oil prices keep rising, then our call option will keep going up in value. But if oil prices start dropping, so too will our profit on this trade.

At this point, I am inclined to believe that oil prices won’t go much higher. American consumers are irate over the high cost of gasoline. That’s something many of them will bear in mind when they vote in the midterm elections in two months.

I don’t know how the stalemate in Iran will be resolved. Perhaps the White House will go along with the deal made between Iran and Oman two weeks ago to share revenues from the Strait of Hormuz.

Regardless of how or when it happens, a full reopening of the Strait of Hormuz should send oil prices plummeting. And when that happens, one profit window will shut while another one swings wide open.

Mirror Image

If you’re wondering how to profit from a reversal in oil prices, you don’t have to look very far. The same ETF that we used to profit from a spike in oil prices can be used to make just as much money going the other way.

Last week, while OILK was trading a little over $56, the put option that expires on November 20 at the $55 strike price could be bought for $5. A put option increases in value when the price of the underlying security goes down.

For that trade to be profitable, OILK must fall below $50 within the next ten weeks. Bear in mind, it was trading at $48 just five weeks ago.

The timing of this option is important. The Trump administration has vowed to reopen the Strait of Hormuz shortly after the midterm elections on November 3, two weeks before this put option expires.

I think that is a smarter bet than holding on to the call option in hopes of squeezing out a few more drops of profit from it. The key to successfully trading stock market profit windows is to know when it’s time to close one window while opening another.

Knowing when one window closes and another opens isn’t a lucky read — it’s a framework you build over time. I’ve been editing Personal Finance for more than a decade, through the 2014 oil collapse, the 2020 crash, and the 2022 rate shock. The framework hasn’t changed: find where the market is mispriced, position ahead of the rotation, exit when the math no longer holds. I’m applying that same discipline to what I think is the most mispriced trade in today’s market — the AI buildout. The briefing lays out why I rotated out of the builders and into the businesses quietly using AI to widen margins, and names the specific sectors I’m watching now. Read the AI Margin Rotation briefing →