Energy bulls not done with oil rally
Chris McKhann | email@example.com
optionMONSTER's Heat Seeker monitoring program detected a large bullish combination strategy in the United States Oil Fund, which tracks the price of crude. The trade bought 18,500 December 38.50 calls for $1.72 and sold the same number of December 34 puts for $1.65. The previous open interest at both strikes was less than 500 contracts, so it was a new opening position.
It cost just $0.07 to open, which is all they'll lose if USO stays between $34 and $38.50. Above that range, profits mount as the stock goes up. Below $34, they face losses and the potential obligation to buy shares for more than the prevailing market price.
USO fell 1.27 percent to $35.76 yesterday, engulfing the previous four days as it opened higher and finished lower. The fund has been rallying from its 52-week low of $29.02 over the last two months. Its high above $42 occurred at the start of March before plunging in May on worries about Europe.
Total volume was more than triple the daily average, according to Heat Seeker.