USO Options Hot as ETF Extends Skid

One trader bet $3 million on a USO floor

Patrick Martin
Nov 12, 2018 at 3:02 PM
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The United States Oil Fund (USO) has been in a freefall amid the collapse of oil prices in recent weeks. After slowly giving back gains throughout the day, December-dated crude futures fell 0.4% to trade at $59.93 per barrel, marking their 11th straight loss -- the longest losing streak in over 30 years. As far as the exchange-traded fund (ETF), USO is down 0.3% to trade at $12.66 -- set for its own 11-day losing streak -- but one options trader is betting on an end to this sharp pullback. 

At last check, nearly 192,000 USO puts have been traded -- three times what's typically seen at this point in the day, with volume pacing for the 99th percentile of its annual range. According to Trade-Alert, one trader sold to open 156,000 January 2019 11.50-strike puts, for about $3 million. By doing so, the trader expects the oil ETF to hold above the $11.50 level through January options expiration. 

On the charts, the ETF has shed 22% since its Oct. 3 high of $16.24. Since then, USO has been guided lower by its descending 10-day moving average, and is now on pace for its lowest close since April. A breach of that $11.50 level the trader is targeting would put USO at 2018 lows. 

Daily ETF Chart US Oil


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