Unusual bearish play in U.S. Oil Fund
Chris McKhann | [email protected]
optionMONSTER systems show that a trader bought 13,000 September 35 puts for $0.65 and sold 13,000 January 30 puts for $0.42. Volume at each strike was above open interest at each strike, so this is new positioning.
The trade, known as a diagonal spread, is similar to a regular bearish vertical spread but uses the sale of the longer-dated puts to further offset the cost and take advantage of the "skew," as those January 30 puts have a higher implied volatility. (See our Education section)
USO is off 0.96 percent to $37.07 this afternoon, down from yesterday's $37.64 peak. Shares were at a 22-week low of $30.79 in mid-April.
The fund's total option volume tops 95,000 already today, compared to a daily average of 59,420 in the last month. Puts outnumber calls by 6 to 1.