Big Printin’ – $USO, $RF

by Dan January 28, 2016 3:37 pm • Commentary

Here were are a couple directional options trades that caught my eye in today’s trading:

1) USO – when the etf that tracks the price of oil was $9.64 a trader sold to open 50,000 April 8 puts at .37 to open.  If this is in fact a bullish trade, the put seller will receive the 37 cents in premium, or $1.85 million if the USO is above $8 on April expiration.  What’s interesting about the choice of the 8 strike is that the all time closing low for USO came on Jan 20th at $8.24, having made an intra-day low of $7.92 which corresponded with a 13 year closing low for crude oil of $26.55 that day.

USO1yr
from Bloomberg

2) RF – the regional bank stock so a large bullish roll when the stock was $8.04, a trader sold to close 30,000 Feb 8 calls at 28 cents and bought to open 40,000 March 8 calls for 43 to open.  These calls break-even at $8.43, up about 5%, but for a stock that is down 16% on the year, and down 26% from its 52 week highs, it seems that if you had a directional inclination on the direction of RF, that at the money options in the stock in March appear to be dollar cheap.  Key point is directional inclination, as the March 8 straddle (the call and the put premium) is offered at 84 cents or about 10% of the stock price, which is a bit meaty.