Options Trading News

February 6, 2013  Wed 11:22 AM CT

The U.S. Oil Fund is seeing an unusual call spread that is actually bearish on the name.

optionMONSTER systems show that a trader bought 4,500 March 34.50 calls for the ask price of $1.24 and sold 4,000 March 33.50 calls for the bid price of $1.94. The volume was higher than the previous open interest at each strike, so this is a new credit spread. (See our Education section)

This trade takes in a credit of $0.70, which will be the gain if the USO is below $33.50 at that March expiration. The credit spread is virtually identical to buying the 34.50/33.50 put spread to profit from a drop in the share price of the exchange-traded fund.

The USO is up fractionally at $35.05 this afternoon, continuing to trend higher from support just above $32 in the last two months. But this week is the first time it has traded below its 10-day moving average since mid-December.
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The art of trading

As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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