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Turning time into money with oil fund

David Russell (david.russell@optionmonster.com)

One investor is turning time into money with an inverse-leveraged oil fund.

optionMONSTER's tracking programs detected the sale of about 5,200 October 38 calls on the ProShares UltraShort Crude ETF. The options priced for $3.05, which the trader will get to keep if this exchange-traded fund closes below $38 on expiration.

The SCO is double-leveraged to move in the opposite direction as crude oil and owns derivatives to generate that performance. The October 38 calls also carry rich premiums because implied volatility is 54 percent versus the fund's 44 percent historical rate.

Selling calls lets the investor profit from time decay linked to the fund and its options. The trader is essentially betting that the SCO will stay at its current level or decline, which would be consistent with crude oil prices moving sideways or rallying. (See our Education section)

The fund rose 1.66 percent to $37.95 yesterday. Total option volume was 11 times greater than average in the session.

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