Trading Oil via options

T

Thous@nd-lot-Trader

Hi,

I only traded oil via the CL ( CrudeLight ) Futures.

To replicate different strategies, I would like to trade options as well.

The options on the CL Future are "quite wide", but have longer trading hours, whereas the USO Options on the ETF quote "quite tight".

What is your preferable underlying to trade options regarding liquidity and tight spreads ?

Greetings,
Al
 
Quote from Thous@nd-lot-Trader:

Hi Dia,

thank you for the reply.

Do you trade the options on the USO; how is it in reality regarding size and spreads for combos?

Many greetings
More...

USO has pretty decent liquidity but I have seen that it isn't the greatest in long term tracking of oil. If you are utilizing short term strategies you might be ok but I wouldn't recommend it long term. Forgot where I read about the problems it has but if you google "problems with USO" I think you will find info.
 
Quote from Dolemite:

USO has pretty decent liquidity but I have seen that it isn't the greatest in long term tracking of oil. If you are utilizing short term strategies you might be ok but I wouldn't recommend it long term. Forgot where I read about the problems it has but if you google "problems with USO" I think you will find info.
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Your info is wrong. USO tracks CL very close, even long term as the 1 year charts show.

Screenshot-1.png


Screenshot.png
 
Yes, USO acts as a proxy for the front month. However when the front of the curve is in contango (as in now), rollover costs have to be considered for long term holding.
 
So how does "contango" affect these two trades? They look the same to me using rough quotes.
  • July 2011 Buy CL @ $102.00
  • July 2012 Sell CL @ $87.00
  • Minus 14.7%
  • July 2011 Buy USO @ $38.00
  • July 2012 Sell USO @ $33.00
  • Minus 13.2%


:)
 
Quote from diaoptions:

So how does "contango" affect these two trades? They look the same to me using rough quotes.
  • July 2011 Buy CL @ $102.00
  • July 2012 Sell CL @ $87.00
  • Minus 14.7%
  • July 2011 Buy USO @ $38.00
  • July 2012 Sell USO @ $33.00
  • Minus 13.2%


:)
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As I said, long term (not short term) there seems to be some problems with USO. I realize this data is old but I can't think of why the info is not still valid.

http://www.tradersnarrative.com/usos-valuation-drift-3066.html
 
Quote from diaoptions:

So how does "contango" affect these two trades? They look the same to me using rough quotes.
  • July 2011 Buy CL @ $102.00
  • July 2012 Sell CL @ $87.00
  • Minus 14.7%
  • July 2011 Buy USO @ $38.00
  • July 2012 Sell USO @ $33.00
  • Minus 13.2%


:)
More...

The fact that they are not the same is the point we are trying to make. It does not track the crude oil futures as it should.
 
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