USO rushes higher again, this bearish strategy is more stable
On March 12th, the situation in the Middle East escalated again, and the market's worries about the disturbance of Gulf shipping and the tightening of crude oil supply rose rapidly, and the international oil price rose sharply. Affected by this, crude oil-related assets have once again become the focus of the market, risk assets are under pressure as a whole, and funds have returned to the main trading line of "supply shock-rising oil prices-rising inflation worries".
Corresponding to$United States Oil Fund LP (USO) $Although the short-term trend is still strong, after the continuous sharp rise, the price has risen obviously, and the implied volatility is at an extremely high position. The option chain you gave shows that the current IV of USO has reached 120.90%, and the IV percentile and IV ranking are both near the 52-week high, indicating that the market has very well priced the subsequent volatility. In this case, the cost-performance ratio of continuing to chase up is declining.
From a strategic point of view, this environment of "strong but high volatility, and bullish profits have been quickly priced" is more suitable for dealing with the idea of collecting premium. If it is judged that it is difficult to effectively break through the pressure range above $120-$123 before the expiration of USO, you can consider building a bear market bullish spread strategy of 120/123, and strive for profits by collecting premium while controlling upside risks.
USO Bear Call Spread Strategy
Strategic Structure
Investors in$United States Oil Fund LP (USO) $Build a Bear Call Spread strategy on options. This strategy is a bearish/shock strategy that collects premium, limited income and limited risk, and is suitable for judging the situation that it is difficult for USO to effectively break through the upper pressure area, maintain shock or drop slightly before expiration.
1 ️ ⃣ Sell Lower Strike Price Call (Main Source of Revenue)
Sell 1 Call with strike price K₁ = $120
premium charged = $5.38/share (at mid-parity)
The Call is closer to the current price and is a major source of revenue for Strategy premium. As long as the expiration price is ≤ $120, the option lapses and the investor retains all premium rights.
2 ️ ⃣ Buy the higher strike price Call (control upside risk)
Buy 1 Call with strike price K₂ = $123
Paid premium = $4.75/share (at mid-parity)
This Call is used to limit the risk when USO rises sharply and avoid the risk of unlimited losses brought by naked selling calls.
3 ️ ⃣ Call-end net income (per share)
Net premium income was:
5.38 − 4.75= $0.63/share
This is the greatest available gain from the strategy.
Maximum Profit
When the USO expiry price is ≤ $120:
Both calls are out of the money
All options lapse
Investors Retain All Net premium
Maximum Profit (Per Share) = $0.63
Per contract (100 shares) = $63
Occurrence conditions:
Maturity Price ≤ $120
Maximum loss
When USO expiry price ≥ $123:
Both calls are in-price
The strike spread is fully locked in
Calculation:
Strike spread:
123 − 120= $3
Maximum loss (per share):
Strike Spread − Net premium
=3 − 0.63= $2.37/share
Maximum loss per contract = $237
Occurrence conditions:
Price to maturity ≥ $123
BREAK-EVEN POINT
Formula:
Sell Call Strike Price + Net premium
=120+0.63= $120.63
Maturity judgment:
Price ≤120.63 → Earnings
Price =120.63 → No Profit or Loss
Price ≥120.63 → Loss
V. Strategy characteristics and applicable scenarios
Strategic characteristics
Clear bearish/shock-looking strategy
Collect premium Structure, Time Value Is Good For Investors
The maximum gain and maximum loss are determined when the position is opened
Upside risk is capped compared to naked selling Call
Risk-to-return ratio is approximately 1:0.27 (risk 2.37, return 0.63)
Applicable Scenario
When investors judge:
The USO has a clear pressure in the 120 – 123 range
The probability of an effective breakthrough of 123 in the short term is low
Although crude oil is still supported by geopolitical risks, short-term bulls have been quickly priced, and stronger catalysis is needed to continue to rise
Or the implied volatility is extremely high, which is suitable for constructing a closing premium structure
The structure is essentially:
"Use the risk of $2.37 to win the income of $0.63".
The winning rate of the strategy depends on the judgment that "the price holds the pressure above 120, at least not effectively breaking through 120.63"; If the situation in the Middle East continues to deteriorate and oil prices soar further, USO quickly breaks through the pressure range, and the portfolio loss will expand, but the maximum loss has been capped when the position is opened.
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