How volatility trader is playing oil ETF

optionMONSTER

A large trade is looking for higher volatility in the U.S. Oil Fund in coming months.

More than 4,500 each of the August 34.50 puts and 35.50 calls traded this morning, according to optionMONSTER systems. A block of 3,800 puts was bought for the ask price of $0.99 while the same number of calls traded in one print for $0.82, also apparently bought.

The volume was more than twice open interest at each strike, so this is a new strangle trade that is looking for increased volatility over the coming weeks. The implied volatility of those options is around 20 percent, while the 20-day historical volatility is just below that. (See our Education section)

The USO is up fractionally at $34.81 this morning. It faces resistance at $35 going back to September, with a couple of short breaks in February. Shares were down at $31 in mid-April. 

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