{"id":27500,"date":"2015-05-30T12:07:03","date_gmt":"2015-05-30T19:07:03","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=27500"},"modified":"2015-05-30T12:07:03","modified_gmt":"2015-05-30T19:07:03","slug":"a-race-against-bearish-sentiment-and-volatility-for-the-united-states-oil-etf","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2015\/05\/30\/a-race-against-bearish-sentiment-and-volatility-for-the-united-states-oil-etf\/","title":{"rendered":"A Race Against Bearish Sentiment And Volatility for the United States Oil ETF"},"content":{"rendered":"<p><strong>(This is an excerpt from an article I originally published on Seeking Alpha on March 16, 2015. <a href=\"http:\/\/seekingalpha.com\/article\/3004816-a-race-against-volatility-and-bearish-sentiment-for-the-united-states-oil-etf\" target=\"_blank\">Click here to read the entire piece<\/a>.)<br \/>\n<\/strong><\/p>\n<p>On March 5, 2015, Barron&#8217;s Blogs published a short article on a large bet against volatility on United States Oil ETF (USO) called &#8220;<a href=\"http:\/\/blogs.barrons.com\/focusonfunds\/2015\/03\/05\/big-options-bet-sees-oil-etf-rangebound-into-2017\/\" target=\"_blank\">Big Options Bet Sees Oil ETF Rangebound into 2017<\/a>.&#8221; {snip}<br \/>\n<center><br \/>\n<figure id=\"attachment_27537\" aria-describedby=\"caption-attachment-27537\" style=\"width: 540px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/03\/150313_USO-weekly.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/03\/150313_USO-weekly.png\" alt=\"An extended period of relative tranquility has been rudely interrupted\" width=\"550\" height=\"375\" class=\"size-full wp-image-27537\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/03\/150313_USO-weekly.png 550w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/03\/150313_USO-weekly-300x205.png 300w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/a><figcaption id=\"caption-attachment-27537\" class=\"wp-caption-text\">An extended period of relative tranquility has been rudely interrupted<\/figcaption><\/figure><br \/>\n<strong>Source: <a href=\"http:\/\/www.freestockcharts.com\/platform\/v1\" target=\"_blank\">FreeStockCharts.com<\/a><\/strong><br \/>\n<\/center><\/p>\n<p>Directionless, long-term bets seem very reasonable especially given the runway allowed to close-out the trade at a profit well ahead of expiration.<\/p>\n<p>{snip}<\/p>\n<p>The Barron&#8217;s blog indicated that the big trade will work as long as USO remains within the range of $12.30\/share to $25.70\/share. It did not provide the specific strikes, so I directly reviewed the Jan 2017 strikes for large increases in open interest. After this process, I concluded that the swell of negative short-term bets combined with the dispersion of opinion on longer-term bets makes a directionless bet more intriguing. {snip}<\/p>\n<p>On a short-term basis, the opinion on USO is definitively negative although sentiment has hit even more negative levels before the big sell-off started. {snip}<\/p>\n<p><center><br \/>\n<figure id=\"attachment_27528\" aria-describedby=\"caption-attachment-27528\" style=\"width: 540px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/03\/150313_USOOpenInterestPutCallRatio.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/03\/150313_USOOpenInterestPutCallRatio.png\" alt=\"The overall open interest put\/call ratio stair-stepped tentatively until AFTER USO made its last major low\" width=\"550\" height=\"385\" class=\"size-full wp-image-27528\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/03\/150313_USOOpenInterestPutCallRatio.png 550w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/03\/150313_USOOpenInterestPutCallRatio-300x210.png 300w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/a><figcaption id=\"caption-attachment-27528\" class=\"wp-caption-text\">The overall open interest put\/call ratio stair-stepped tentatively until AFTER USO made its last major low<\/figcaption><\/figure><br \/>\n<strong>Source: <a href=\"http:\/\/www.schaeffersresearch.com\/streetools\/indicators\/putcall_open_interest_ratio.aspx?TICKER=USO\" target=\"_blank\">Schaeffer&#8217;s Investment Research<\/a><\/strong><br \/>\n<\/center><\/p>\n<p>In other words, the market only recently started to accept the bearish nature of the trading in USO as a result of the bearish fundamentals&#8230;{snip}<\/p>\n<p><center><br \/>\n<figure id=\"attachment_27516\" aria-describedby=\"caption-attachment-27516\" style=\"width: 540px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/03\/150313_VariousMarketOptionImpliedVolatilities.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/03\/150313_VariousMarketOptionImpliedVolatilities.png\" alt=\"Volatility across financial markets has expanded rapidly from last year&#039;s levels - oil stands out as having reached levels of volatility equal to those of the financial crisis\" width=\"550\" height=\"370\" class=\"size-full wp-image-27516\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/03\/150313_VariousMarketOptionImpliedVolatilities.png 550w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/03\/150313_VariousMarketOptionImpliedVolatilities-300x202.png 300w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/a><figcaption id=\"caption-attachment-27516\" class=\"wp-caption-text\">Volatility across financial markets has expanded rapidly from last year&#039;s levels &#8211; oil stands out as having reached levels of volatility equal to those of the financial crisis<\/figcaption><\/figure><br \/>\n<\/center><\/p>\n<p>{snip}<\/p>\n<p><center><br \/>\n<figure id=\"attachment_27525\" aria-describedby=\"caption-attachment-27525\" style=\"width: 540px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/03\/150313_USOSchaeffersVolatilityIndex.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/03\/150313_USOSchaeffersVolatilityIndex.png\" alt=\"It took a while for the market to accept the tremendous downside potential on USO. The volatility index did not even reach a new high until the sell-off was about 3 months old.\" width=\"550\" height=\"360\" class=\"size-full wp-image-27525\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/03\/150313_USOSchaeffersVolatilityIndex.png 550w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/03\/150313_USOSchaeffersVolatilityIndex-300x196.png 300w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/a><figcaption id=\"caption-attachment-27525\" class=\"wp-caption-text\">It took a while for the market to accept the tremendous downside potential on USO. The volatility index did not even reach a new high until the sell-off was about 3 months old.<\/figcaption><\/figure><\/p>\n<p><figure id=\"attachment_27526\" aria-describedby=\"caption-attachment-27526\" style=\"width: 540px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/03\/150313_USOSchaeffersVolatilityIndex-3months.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/03\/150313_USOSchaeffersVolatilityIndex-3months.png\" alt=\"The volatility index on USO peaked just after its recent low.\" width=\"550\" height=\"360\" class=\"size-full wp-image-27526\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/03\/150313_USOSchaeffersVolatilityIndex-3months.png 550w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/03\/150313_USOSchaeffersVolatilityIndex-3months-300x196.png 300w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/a><figcaption id=\"caption-attachment-27526\" class=\"wp-caption-text\">The volatility index on USO peaked just after its recent low.<\/figcaption><\/figure><br \/>\nSource: <a href=\"http:\/\/www.schaeffersresearch.com\/streetools\/filters\/equity_vix.aspx?TICKER=USO\" target=\"_blank\">Schaeffer&#8217;s Investment Research<\/a><br \/>\n<\/center><\/p>\n<p>The behavior of the SVI suggests that the market in USO is very reactive rather than predictive. {snip}<\/p>\n<p>Like the open interest put\/call ratio, it took the failure of OPEC&#8217;s November meeting to prop up prices for USO shorts to get really serious. {snip}<\/p>\n<p><center><br \/>\n<figure id=\"attachment_27529\" aria-describedby=\"caption-attachment-27529\" style=\"width: 540px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/03\/150313_USOShortInterest.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/03\/150313_USOShortInterest.png\" alt=\"Shares short on USO were sitting at a major low one month into the sell-off...\" width=\"550\" height=\"386\" class=\"size-full wp-image-27529\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/03\/150313_USOShortInterest.png 550w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/03\/150313_USOShortInterest-300x211.png 300w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/a><figcaption id=\"caption-attachment-27529\" class=\"wp-caption-text\">Shares short on USO were sitting at a major low one month into the sell-off&#8230;<\/figcaption><\/figure><br \/>\n<strong>Source: <a href=\"http:\/\/www.schaeffersresearch.com\/streetools\/filters\/equity_si.aspx?TICKER=USO\" target=\"_blank\">Schaeffer&#8217;s Investment Research<\/a><\/strong><br \/>\n<\/center><\/p>\n<p>{snip}<\/p>\n<p><center><br \/>\n<figure id=\"attachment_27527\" aria-describedby=\"caption-attachment-27527\" style=\"width: 540px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/03\/150313_USOShortInterest-1year.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/03\/150313_USOShortInterest-1year.png\" alt=\"...and shares short did not take-off in earnest until December (after OPEC could not decide to cut production to try to prop up prices)\" width=\"550\" height=\"387\" class=\"size-full wp-image-27527\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/03\/150313_USOShortInterest-1year.png 550w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/03\/150313_USOShortInterest-1year-300x211.png 300w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/a><figcaption id=\"caption-attachment-27527\" class=\"wp-caption-text\">&#8230;and shares short did not take-off in earnest until December (after OPEC could not decide to cut production to try to prop up prices)<\/figcaption><\/figure><br \/>\n<strong>Source: <a href=\"http:\/\/www.schaeffersresearch.com\/streetools\/filters\/equity_si.aspx?TICKER=USO\" target=\"_blank\">Schaeffer&#8217;s Investment Research<\/a><\/strong><br \/>\n<\/center><\/p>\n<p>{snip}<\/p>\n<p><center><br \/>\n<figure id=\"attachment_27542\" aria-describedby=\"caption-attachment-27542\" style=\"width: 540px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/03\/150316_USO-part.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/03\/150316_USO-part.png\" alt=\"United States Oil ETF (USO) makes a new (intraday) all-time low shortly after opening for trading on March 16, 2015\" width=\"550\" height=\"375\" class=\"size-full wp-image-27542\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/03\/150316_USO-part.png 550w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/03\/150316_USO-part-300x205.png 300w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/a><figcaption id=\"caption-attachment-27542\" class=\"wp-caption-text\">United States Oil ETF (USO) makes a new (intraday) all-time low shortly after opening for trading on March 16, 2015<\/figcaption><\/figure><br \/>\n<strong>Source: <a href=\"http:\/\/www.freestockcharts.com\/platform\/v1\" target=\"_blank\">FreeStockCharts.com<\/a><\/strong><br \/>\n<\/center><\/p>\n<p>{snip}<\/p>\n<p>Be careful out there!<\/p>\n<p>Full disclosure: no positions<\/p>\n<p><strong>(This is an excerpt from an article I originally published on Seeking Alpha on March 16, 2015. <a href=\"http:\/\/seekingalpha.com\/article\/3004816-a-race-against-volatility-and-bearish-sentiment-for-the-united-states-oil-etf\" target=\"_blank\">Click here to read the entire piece<\/a>.)<br \/>\n<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>(This is an excerpt from an article I originally published on Seeking Alpha on March 16, 2015. Click here to read the entire piece.) On March 5, 2015, Barron&#8217;s Blogs published a short article on a large bet against volatility on United States Oil ETF (USO) called &#8220;Big Options Bet Sees Oil ETF Rangebound into &#8230; <a title=\"A Race Against Bearish Sentiment And Volatility for the United States Oil ETF\" class=\"read-more\" href=\"https:\/\/drduru.com\/onetwentytwo\/2015\/05\/30\/a-race-against-bearish-sentiment-and-volatility-for-the-united-states-oil-etf\/\">Read more<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[377,32],"tags":[1514,1515,536,155,1512,538],"class_list":["post-27500","post","type-post","status-publish","format-standard","hentry","category-oil","category-options","tag-iea","tag-international-energy-agency","tag-oil-2","tag-options-trading","tag-united-states-oil-etf","tag-uso"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>A Race Against Bearish Sentiment And Volatility for the United States Oil ETF - ONE-TWENTY TWO: Trading Financial Markets<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/drduru.com\/onetwentytwo\/2015\/05\/30\/a-race-against-bearish-sentiment-and-volatility-for-the-united-states-oil-etf\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"A Race Against Bearish Sentiment And Volatility for the United States Oil ETF - ONE-TWENTY TWO: Trading Financial Markets\" \/>\n<meta property=\"og:description\" content=\"(This is an excerpt from an article I originally published on Seeking Alpha on March 16, 2015. 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Click here to read the entire piece.) On March 5, 2015, Barron&#8217;s Blogs published a short article on a large bet against volatility on United States Oil ETF (USO) called &#8220;Big Options Bet Sees Oil ETF Rangebound into ... 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