Sold USO May 26 Naked Puts

I exited my last USO position with a loss.  That was on March 23rd.  Now that I’ve waited 30 days I can trade it again without having to worry about the tax implications from the wash rule stopping me from writing off my loss on the underlying stock last time around.  I’m longer term bullish on the large oil ETF and figured I could take another option assignment on it again if my naked puts don’t work for me which is why I didn’t hedge the position.

While USO was trading at $27.38 I sold four USO May 26 Puts (UBOQZ) at $0.90 and received $347.00 after commissions.  I started with a limit at the May 27 strike, lowered it to the May 25 strike when I saw the pre-market prices and then after I saw it find footing I raised my limit order back to the May 26 strike with a higher premium than I originally started with.  I entered my order at the ask price and didn’t have to wait more than five minutes for it to hit.

USO made it as low as $22.74 intraday in February.  I don’t expect it to go that low again, but if it does I’ll take the option assignment and either wait it out again or sell covered calls to try to finish the series of trades with a profit.  I think long term downside risk is very limited with USO, but upside potential could be huge from here.  I didn’t consider buying calls because I have no idea when that upside could come.  I’ll be happy to see it stay flat or bounce between $25-31 for the rest of the year.