alwaysdrawing Posted April 21, 2020 Share Posted April 21, 2020 June continues to fall, I am buying more USO puts. I think this could implode today if June goes down to the margin req. I calculate NAV of USO to be 2.42, which means the premium to NAV is around 19% I think it's likely we could see liquidation this week. Buying some shorter term OOTM options. Futures traders may press. Watch for June to continue to fall Buying a lot more Friday $1s Link to comment Share on other sites More sharing options...
alwaysdrawing Posted April 21, 2020 Share Posted April 21, 2020 June continues to fall, I am buying more USO puts. I think this could implode today if June goes down to the margin req. I calculate NAV of USO to be 2.42, which means the premium to NAV is around 19% I think it's likely we could see liquidation this week. Buying some shorter term OOTM options. Futures traders may press. Watch for June to continue to fall Buying a lot more Friday $1s June under $12.....holy shit USO NAV is 2.25.....I think they could hit 0 Link to comment Share on other sites More sharing options...
alwaysdrawing Posted April 21, 2020 Share Posted April 21, 2020 June continues to fall, I am buying more USO puts. I think this could implode today if June goes down to the margin req. I calculate NAV of USO to be 2.42, which means the premium to NAV is around 19% I think it's likely we could see liquidation this week. Buying some shorter term OOTM options. Futures traders may press. Watch for June to continue to fall Buying a lot more Friday $1s June under $12.....holy shit USO NAV is 2.25.....I think they could hit 0 I actually think it's technically possible for USO to go negative if the June contract goes negative. Link to comment Share on other sites More sharing options...
alwaysdrawing Posted April 21, 2020 Share Posted April 21, 2020 June continues to fall, I am buying more USO puts. I think this could implode today if June goes down to the margin req. I calculate NAV of USO to be 2.42, which means the premium to NAV is around 19% I think it's likely we could see liquidation this week. Buying some shorter term OOTM options. Futures traders may press. Watch for June to continue to fall Buying a lot more Friday $1s June under $12.....holy shit USO NAV is 2.25.....I think they could hit 0 I actually think it's technically possible for USO to go negative if the June contract goes negative. This might be the craziest trade of my life.... Link to comment Share on other sites More sharing options...
alwaysdrawing Posted April 21, 2020 Share Posted April 21, 2020 June continues to fall, I am buying more USO puts. I think this could implode today if June goes down to the margin req. I calculate NAV of USO to be 2.42, which means the premium to NAV is around 19% I think it's likely we could see liquidation this week. Buying some shorter term OOTM options. Futures traders may press. Watch for June to continue to fall Buying a lot more Friday $1s June under $12.....holy shit USO NAV is 2.25.....I think they could hit 0 I actually think it's technically possible for USO to go negative if the June contract goes negative. This might be the craziest trade of my life.... USO is halted. Link to comment Share on other sites More sharing options...
rb Posted April 21, 2020 Share Posted April 21, 2020 Buying a lot more Friday $1s June under $12.....holy shit USO NAV is 2.25.....I think they could hit 0 I actually think it's technically possible for USO to go negative if the June contract goes negative. This might be the craziest trade of my life.... Yep, i think i'll buy some USO puts just to be able to say that I did it. Link to comment Share on other sites More sharing options...
alwaysdrawing Posted April 21, 2020 Share Posted April 21, 2020 Yep, i think i'll buy some USO puts just to be able to say that I did it. USO still at a 16% premium to NAV, but the only thing that matters is the underlying. Watch the June contract...as that declines it could force USO into liquidation. Link to comment Share on other sites More sharing options...
rb Posted April 21, 2020 Share Posted April 21, 2020 If USO liquidates, the June may go negative as well. USO is over 20% of June open interest. That's dumb money from Robinhood clients. There's no one to take their place. Link to comment Share on other sites More sharing options...
alwaysdrawing Posted April 21, 2020 Share Posted April 21, 2020 If USO liquidates, the June may go negative as well. USO is over 20% of June open interest. That's dumb money from Robinhood clients. There's no one to take their place. Yep Link to comment Share on other sites More sharing options...
wescobrk Posted April 21, 2020 Share Posted April 21, 2020 thanks for the idea. I told someone about this only buying front contract back in 2009 and I forgot about it. I was able to get a little in for my wife's account but I'm blocked to purchase or short or do options due to my current employer, ugh! Link to comment Share on other sites More sharing options...
vikx01 Posted April 21, 2020 Share Posted April 21, 2020 Interesting take on what might have happened: https://twitter.com/ErikSTownsend/status/1252574865397297152 I took a tiny position short USO just for entertainment. Thanks for the idea alwaysdrawing Link to comment Share on other sites More sharing options...
Castanza Posted April 21, 2020 Share Posted April 21, 2020 I wish Ray Hudson would read the commentary between rb and alwaysdrawing ;D Took a small short position for entertainment as well. Thanks for the idea! Link to comment Share on other sites More sharing options...
writser Posted April 21, 2020 Share Posted April 21, 2020 June continues to fall, I am buying more USO puts. I think this could implode today if June goes down to the margin req. I calculate NAV of USO to be 2.42, which means the premium to NAV is around 19% I think it's likely we could see liquidation this week. Buying some shorter term OOTM options. Futures traders may press. Watch for June to continue to fall Buying a lot more Friday $1s June under $12.....holy shit USO NAV is 2.25.....I think they could hit 0 I actually think it's technically possible for USO to go negative if the June contract goes negative. No, that is not possible .. USO interests are structured as a limited partnership. The GP is on the hook for any losses. Link to comment Share on other sites More sharing options...
alwaysdrawing Posted April 21, 2020 Share Posted April 21, 2020 June continues to fall, I am buying more USO puts. I think this could implode today if June goes down to the margin req. I calculate NAV of USO to be 2.42, which means the premium to NAV is around 19% I think it's likely we could see liquidation this week. Buying some shorter term OOTM options. Futures traders may press. Watch for June to continue to fall Buying a lot more Friday $1s June under $12.....holy shit USO NAV is 2.25.....I think they could hit 0 I actually think it's technically possible for USO to go negative if the June contract goes negative. No, that is not possible .. USO interests are structured as a limited partnership. The GP is on the hook for any losses. I don't mean for the ETF holders per se, but the underlying futures contracts could make NAV decline to less than 0. I agree for long USO ETF holders, their max loss is 100%. Link to comment Share on other sites More sharing options...
alwaysdrawing Posted April 21, 2020 Share Posted April 21, 2020 June continues to fall, I am buying more USO puts. I think this could implode today if June goes down to the margin req. I calculate NAV of USO to be 2.42, which means the premium to NAV is around 19% I think it's likely we could see liquidation this week. Buying some shorter term OOTM options. Futures traders may press. Watch for June to continue to fall Buying a lot more Friday $1s June under $12.....holy shit USO NAV is 2.25.....I think they could hit 0 I actually think it's technically possible for USO to go negative if the June contract goes negative. No, that is not possible .. USO interests are structured as a limited partnership. The GP is on the hook for any losses. I don't mean for the ETF holders per se, but the underlying futures contracts could make NAV decline to less than 0. I agree for long USO ETF holders, their max loss is 100%. Margin req for CL is $7500, so if June futures get to around 7, I believe USO is a forced seller. Link to comment Share on other sites More sharing options...
SharperDingaan Posted April 21, 2020 Share Posted April 21, 2020 This is not just a storage problem. Somebody was getting material margin calls, and tried to roll a big long position into other months; ordinarily not a problem, as long as you have the confidence of the market. But if a growing liquidity concern is suspected, no-one wants you as the counter-party, and you can no longer roll. All you can do is fire sale your position for as much you can get, by end of day. The negative price - indicates that somebody was willing to pay others [a lot] to take the contacts off their hands. This would only occur this aggressively, if liquidity had been cut off, and there was a 'containment' instruction to avoid any physical oil. Physical oil in transit, is routinely sped up, or slowed down, according to need. We will know, if there is a liquidity injection into the inter-bank clearing system within the next few days. There's lots of storage. Just keep the oil in the ground, and DON'T produce it. We just don't have a mechanism yet - most would think that before the next expiry we very likely will have. We live in interesting times. SD This may be a really dumb question but if someone out there has a liquidity problem, how can they pay someone else to take the contract off them? I can understand how a liquidity crunch would drive a firesale at a low positive price. I can't understand how it would drive a negative price. Surely if you're f***ed for cash and the price goes negative you just go bust and stop worrying about the fact that you can't accept delivery? COLLECTIVELY: There are a lot of open contracts to clear/roll Market clearing at losses < margin release. Open positions declining, posted margin increasing. Price volatility triggers posting of additional margin by time X. Margin call selling accelerates. Price volatility, caps the maximum permissible posted margin? Dump to get under the margin cap? market clearing at loss > margin release. In theory, if a counter-party fails, the exchange makes good against the margin posted; the posted letters of credit. In practice, the hope is that the issuers of those letters of credit … are NOT netting against other obligations of the failed counter-party. Liquidity crunch. In practice, the open position also does NOT go to zero upon contract expiry. Refiners may both want the physical, AND have a place to put it; delivery via a tank-to-tank swap at Cushing is not unheard of. Neither is delivering WTI via a tank swap, and replacing with a floating substitute delivered to a tide-water refinery. Those Saudi tankers bound for the US, are there for a reason. As at 1:35 PM EST, the spot price of WTI is PLUS USD 11.18. Yesterday, at 4:09 PM EST. the spot price of WTI was MINUS USD 35.30. A history making USD 44.48+ one-day change in the spot price, yet nobody is taking about it? SD Link to comment Share on other sites More sharing options...
alwaysdrawing Posted April 21, 2020 Share Posted April 21, 2020 June under 11. Link to comment Share on other sites More sharing options...
alwaysdrawing Posted April 21, 2020 Share Posted April 21, 2020 NAV is 2...USO premium is widening Link to comment Share on other sites More sharing options...
alwaysdrawing Posted April 21, 2020 Share Posted April 21, 2020 June under 11. Under 10....that was quick. Think forced selling and liquidation is becoming more likely as it pushes toward margin req. Everyone knows they are forced sellers. Link to comment Share on other sites More sharing options...
alwaysdrawing Posted April 21, 2020 Share Posted April 21, 2020 June under 11. Under 10....that was quick. Think forced selling and liquidation is becoming more likely as it pushes toward margin req. Everyone knows they are forced sellers. Under 9....here we goooooooooooo Link to comment Share on other sites More sharing options...
alwaysdrawing Posted April 21, 2020 Share Posted April 21, 2020 June under 11. Under 10....that was quick. Think forced selling and liquidation is becoming more likely as it pushes toward margin req. Everyone knows they are forced sellers. Under 9....here we goooooooooooo Under 7. I believe USO is a 0. Will be buying any possible put option Link to comment Share on other sites More sharing options...
alwaysdrawing Posted April 21, 2020 Share Posted April 21, 2020 June under 11. Under 10....that was quick. Think forced selling and liquidation is becoming more likely as it pushes toward margin req. Everyone knows they are forced sellers. Under 9....here we goooooooooooo Under 7. I believe USO is a 0. Will be buying any possible put option USO is halted and I believe they will not re-open due to margin call. Link to comment Share on other sites More sharing options...
alwaysdrawing Posted April 21, 2020 Share Posted April 21, 2020 June under 11. Under 10....that was quick. Think forced selling and liquidation is becoming more likely as it pushes toward margin req. Everyone knows they are forced sellers. Under 9....here we goooooooooooo Under 7. I believe USO is a 0. Will be buying any possible put option USO is halted and I believe they will not re-open due to margin call. They may have additional capacity from the next month 20% of the fund....still think it's possible for disorderly exit. Will be watching for forced sales/negative prices. Link to comment Share on other sites More sharing options...
writser Posted April 21, 2020 Share Posted April 21, 2020 I understand you are very excited (which is a bad frame of mind when trading, but whatever) but could you please bundle all your one-liners by editing your last post? Probably wise to take a step back and smoke a cigarette or whatever for a few minutes. Link to comment Share on other sites More sharing options...
alwaysdrawing Posted April 21, 2020 Share Posted April 21, 2020 I understand you are very excited (which is a bad frame of mind when trading, but whatever) but could you please bundle all your one-liners by editing your last post? Probably wise to take a step back and smoke a cigarette or whatever for a few minutes. I'll just sign off...sorry for spamming Link to comment Share on other sites More sharing options...
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