Options Bulls Blast Red-Hot Oil ETF

USO has added more than 10% in April already

Apr 23, 2019 at 3:06 PM
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Skyrocketing oil prices have sparked heavy options trading on United States Oil Fund (USO). The energy-focused exchange-traded fund (ETF) is up 0.9% today to trade at $13.79 -- and 10.3% higher month-to-date -- and calls are in high demand, with one bull betting on even bigger gains over the next month.

Taking a quick step back, roughly 77,500 calls and 38,000 puts have traded on USO so far today -- 1.8 times what's usually seen at this point in the session. The May 14.50 call is most active, due to one trader buying to open a 25,000-contract block for an initial cash outlay of $275,000 (number of contracts * $0.11 premium paid * 100 shares per contract.

This is the most the call buyer stands to lose, should USO settle below the strike price at the close on Friday, May 17, when front-month options expire. Profit, meanwhile, will accumulate on a move above breakeven at $14.61 (strike plus premium paid) -- a level not toppled on a weekly closing basis since Oct. 22.

However, the fund has rallied hard off its Dec. 26 17-month low of $9.23, up almost 50%. This week's 3.5% surge has USO clearing recent congestion near $13.50, which is also a 61.8% Fibonacci retracement of its fourth-quarter sell-off. And while it's just Tuesday, the shares are pacing for an eight straight weekly win, which would mark the longest streak of its kind since early 2014.

uso daily price chart on april 23


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