Huge Blocks of Puts Trade on the USO
Shares of the United States Oil Fund (USO) are sliding to fresh daily lows, currently off by 0.92%, trading at $35.46. Crude has been flirting with the 200-day moving average for the past two weeks, though has had trouble holding position above it.
Paper is buying huge blocks of puts on the USO today. All of the action is on the December $34 strike, where over 46,000 contracts have traded on open interest of only 23,131.
At 10:19am, 22,900 Dec $34 put were purchased, on the offer, for $1.93. Shortly after, at 10:35am, another block of 22,900 puts was purchased, on the offer, for $1.93. The strike is currently bid $1.91, at $1.94.
Near-term implied and historical volatility is registering 28% and 21%, respectively; at $1.93, the Dec $34 puts traded at roughly 33% vol. This is a significant premium over the underlying, indicating that the trader is expecting big movement and is willing to pay for exposure to it.
The United States Oil Fund seeks to reflect the performance less expenses of the spot price of West Texas Intermediate (WTI) light sweet crude oil. The fund will invest in futures contracts for WTI light sweet crude oil, other types of crude oil, heating oil, gasoline, natural gas, and other petroleum based-fuels that are traded on exchanges.
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