Oil ETF Calls Pop as OPEC Meeting Looms

The OPEC's bi-annual meeting kicks off tomorrow

by Patrick Martin

Published on Dec 4, 2019 at 1:55 PM

As oil prices rally today, the Organization of the Petroleum Exporting Countries (OPEC) will hold its bi-annual meeting in Vienna, Austria this Thursday. Ahead of the event, options traders are targeting the United States Oil Fund (USO), with bulls betting on a bigger move from the oil-focused exchange-traded fund (ETF). 

More specifically, call options are being traded at two times the average intraday amount today, and double the number of puts changing hands. There's new positions being opened at the December 12.50 call, which expires on December 20. 

This appetite for calls is nothing new, though. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) USO sports a Schaeffer's 50-day call/put volume ratio of 2.98, which ranks 1 percentage point from an annual high. Digging deeper, the December 12- and 13.50-strike calls are home to peak front-month open interest. 

Those purchasing short-term options are finding relatively rich premiums at the moment, since USO's 30-day implied volatility (IV) skew of 18.9% ranks in the elevated 86th percentile of its 12-month range, indicating USO puts have been more expensive relative to calls, from an IV standpoint, just 14% of the time over the past year.

On the charts, the oil ETF last seen trading up 3.7% at $12.19 -- up 26.3% year-to-date, with support emerging at the $10.50 level. However, USO's recent rally the last month appears to have run out of steam below its 320-day moving average, a trendline only toppled once on a closing basis in the past six months.

Daily ETF Chart USO


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