This is an update at 3PM. With UCO taking a beating, once again all UCO straddles and strangles are profitable. There is now another attractive UCO strangle at 6-7.50. If the drop in oil was indeed caused by USO rollover, then this can do quite well on the upside. If not, and oil continues to drop, we are protected by the put. That is the beauty of straddles.
Note that the volume on the 6's is only 2, but there are 1,200 open positions so the purchase is feasible. The 7.50s have traded 1,270 contracts today and there are 5,800+ open positions.
Gasoline inventories were bullish today, drop higher than expected, yet UGA dropped. The reason for the drop could just be the switch from winter gas to summer gas. UGA seems more attractive than USO.
Keep in mind that USO holders will at some point realize the horrible instrument they are holding and may vote with their feet, unless the USO positions are being bought to keep the price of oil down on purpose.
Up or down? Straddles!