United States Oil ETF (USO): A Beneficiary To Egypt Unrest

Among a seemingly endless sea of red in Friday’s trading session, oil stood as a safe haven for bulls fleeing the equities scene.  While the turmoil in Egypt acted as a thorn in the side for equity investors, it turned out to be just what the doctor ordered for the oil patch which had fallen seven out of the previous eight trading sessions.

The flurry of activity sparked by the unrest in Egypt can be easily viewed using the United States Oil ETF (NYSE:USO) (not shown).  With over 30 million shares traded, Friday marks the second highest volume day in (USO) since establishing its bear market bottom in early 2009.

The surge in volume wasn’t isolated to just the underlying, however; USO options also experienced a noticeable increase in demand.  All told, the OVX, commonly referred to as the oil VIX, increased over 11% on the day reaching levels not seen since mid-November.  Though traders also flocked to snatch up SPX options (VIX was up 24%), I suggest the underlying reason was different.  While traders playing USO options were likely seeking ways to profit from further upside in oil, those buying SPX options were likely seeking protection against a continued downfall in equities.

Going forward it will be interesting to see if oil continues to be the recipient of increased demand or whether Friday was a one hit wonder.  As for me, I suspect it will be the former.

[Source:  MachTrader]

Written By Tyler Craig From Tyler’s Trading

ABOUT: Tyler Craig, author of Tyler’s Trading and owner of TC  Trading, Inc. Over the years I’ve educated hundreds of traders through my work with one of the nation’s leading educational firms. I enjoy writing and am a current monthly contributor to the Wealth Intelligence Magazine.  My writings have also been featured in Expiring Monthly and frequently show up in the Abnormal Returns Options Newsletter.  In 2009 I started Tyler’s Trading to share daily market commentary on stocks and options.

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