I just closed my USO long position. I bought back the puts that I wrote for \$1.75 about a month ago. This represents a realized profit of \$280 - \$15 for commission. I actually wanted to get out of this position last Friday when USO tested \$30. But my stop was never triggered so I held on to the options through the weekend, thinking I'd benefit from the time decay anyway.
Today, USO reached \$30.50 with some relatively low volume. \$30.50 also mark the top of a recent up channel (Figure 2). With my limited profit potential at this point, I'm inclined to take my profit than risk a retracement.
This trade has certainly been a roller coaster ride. The price of USO didn't move up as planned. It actually took a dive but picked itself up back to around my entry price on a slow up move. In the end, it was the time decay of the options that helped to make this supposedly losing trade into a winning one.
This is another example to favour writing puts instead of buying shares in this volatile market condition.
On another note, I'll look into USL instead of USO in the future for any Oil trade. The April roll over contango took a stab at the USO price last month. I was lucky for the short put strategy saving me.
[caption id="attachment_1347" align="aligncenter" width="500" caption="US Oil ETF"][/caption]
[caption id="attachment_1348" align="aligncenter" width="500" caption="US Oil ETF"][/caption]