Why call spread is bearish on oil ETF

optionMONSTER

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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