Options expiration is probably having an effect on the price of USO.
Just last month, WTI was briefly higher than Brent. As the spread gets wider, the trade will be Long WTI / Short Brent. This spread will eventually have to narrow. It should not come as a surprise that the OPEC countries will be holding a huge number of WTI contracts when they are ready to announce a cutback.
USO is now struggling to stay within the 18/20 channel. This trade has been good.
Lets see if 18 will hold as support.
Take a look at this article "WTI caught between rock and a hard place", Feb 20, 2015
The article shows a chart with the Slow Stochastics (8,3,3) of WTI currently near it's bottom.
While not exactly the same as USO, it should be close enough to trade off of.
WTI is currently in an ascending triangle, which is a bullish pattern.
The author suggests that WTI being near the bottom of the channel, presents a trading opportunity.
Thanks for all of your comments. There is a lot to consider when playing these VIX products.
Looking at the one year chart for both SPY and SVXY, May & June 2014 was rising stock prices with relatively low volatility, thus resulting in the yearly high for SVXY on 7/3/14. Even though the SPY is currently near it's all time high, the wide channel caused by the high volatility is causing a major decline in SVXY. SVXY is currently near it's low of 10/15/14 when the SPY was over 10% lower than it's current price. Obviously, there is no direct correlation between SPY and SVXY. Since it looks like SPY may be in a converging channel, we should expect a dramatic move near the apex. I am thinking of buying some SVXY calls when SPY drops down to the bottom of the channel.
I did the following one year comparison:
Jan 2: 43.44 Dec 31: 31.51
Net gain of 27.5%
Jan 2: 66.11 Dec 31: 61.16
Net loss of 7.5%
For a long term position, being short VXX would appear to be more profitable than being long SVXY.
However, I noticed that for shorter periods, such as from 10/16/14 - 12/5/14, being long SVXY would outperform being short VXX.
Has anyone done a more detailed analysis of this comparison?
Take a look at the previous 2 sharp declines for GILD. The recovery time is relatively quick. Call spreads are good if you are concerned about a further decline.
Are you doing any option plays for NFLX? Now that the right shoulder has matched the left shoulder, thinking about doing some March OTM put spreads.
The previous low held during the retest. However, it now appears to be forming another descending triangle having a base at 17.10 Looks like the apex of the triangle will be formed on Tuesday.
Looking at the one year chart, 450 would make for a balanced H&S pattern. Shorts would probably be jumping in at that level.
New article just out about this:
"The ECB's 4 QE Scenarios, And Why CS Thinks Waking From The "QE Dream" May Be The Worst Possible Outcome"