Bearish position in obscure oil ETF
David Russell | [email protected]
The U.S. 12-Month Oil ETF usually only sees volume of 50 options contracts in a typical session, but today more than 8,000 contracts have crossed our monitors. Two large blocks of 4,000 each dominated the activity.
The December 45 puts were bought for $3.51 and the December 45 calls were sold for $1.48, according to optionMONSTER's Depth Charge system. There was no open interest in either when the day began, so this is a new opening position.
The trade cost $2.03 to open and is tantamount to selling the USL for $42.97. The investor probably owns shares in the fund and is using the options as a surrogate for exiting the position.
If the USL falls, the trader will have locked in a minimum exit price. And if it rebounds above $45, he or she will be forced to unload the shares for that price.
The fund is up about 10 percent in the last month, so the investor is probably trying to protect gains. (See our Education section for more on how investors can use options to manage portfolio positions.)
USL is trading at $42.59 this afternoon, down 1.16 percent on the day.