USO Options Traders Place Massive Bets

Some huge options trades have transpired on USO so far today

Mar 23, 2017 at 2:47 PM
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The United States Oil Fund (USO) is seeing intense options trading this afternoon, as the exchange-traded fund (ETF) continues to struggle along with crude oil prices. At last check, the shares were down 1.1% at $10.01, after yesterday falling into single-digit territory for the first time since late November.

The most activity has transpired at the June 12 strike. There, it appears one options trader opened a synthetic short position totaling 40,000 contracts. Specifically, the speculator purchased 20,000 USO put options and sold a matching block of call options, anticipating extended downside through June expiration. The total cash outlay on the trade was $4 million ($2 net debit * 20,000 contracts * 100 shares per contract), and breakeven on the transaction is $10 (strike less net debit).

Another huge USO options trade went off at the October 9 put. According to Trade-Alert and the International Securities Exchange (ISE), a 15,000-contract block was sold to open for $750,000 ($0.50 premium received * number of contracts * 100 shares per contract), with the goal of $9 serving as a foothold over the next seven months. Notably, USO hasn't breached that level since its early April annual low at $8.99.

Technically speaking, United States Oil Fund shares have struggled of late, but they have strung together a series of higher lows over the past 12 months. It's anyone's guess where the ETF goes next. On the one hand, oil prices have been plunging amid mounting crude inventories, while on the other, USO's slide has landed it in oversold territory, with a 14-Day Relative Strength Index (RSI) of 25 -- suggesting a near-term bounce could be due.

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