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Oil ETF faces downside position

Chris McKhann (chris.mckhann@optionmonster.com)

A large trade is positioning for a possible pullback in the U.S. Oil Fund.

optionMONSTER's Depth Charge system detected the purchase of 10,000 July 36 puts for the ask price of $0.22 yesterday. This is clearly a new position, as its volume was well above the strike's previous open interest.

The puts aren't tied to any trading in USO shares identified by our systems yesterday, so they could have been bought in an outright bearish position. Alternatively, they could be a protective hedge on an existing long position in the USO or oil futures. (See our Education section)

The USO was up fractionally at $37.55 yesterday. The exchange traded fund reached $38.27 last week, its highest price since mid-September. It has been trending upward from a 52-week low under $33 set in January.

Total option volume in the USO surpassed 35,300 yesterday, double its daily average for the last month. Overall puts outpaced calls by more than 2 to 1.

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