r/wallstreetbets
Over 100% USO (US Oil Etf) Shares Sold Short. Yolo MCL (Wti Micro) Long for $96 k
Author goes long on WTI crude oil futures citing over 100% short interest in USO and Strait of Hormuz closure.
- USO has over 100% short interest, setting up a potential short squeeze if oil prices rise.
- Spot prices are $8 higher than next month's futures, indicating severe near-term supply tightness.
- Strait of Hormuz is closed and not expected to open soon, disrupting global oil supply.
19.6 million of 14.5 million USO shares sold short. Traders are another 140 million barrels short on futures markets.
Spot prices have locked in $8 higher than next month futures.
SoH is closed and that shit ain’t opening
1100 barrels YOLO WTI for 96k
Disclosure: I am a retail trader, not a financial pro or oil professional
BFLO - Retail
This reeks of an insider trade on some news that will break today about the peace agreement.
100%
Yes, but no.
USO has been heavily shorted for a few weeks now. This is not something that suddenly happened yesterday.
Iran and the US have also been trading strikes the past couple of days, and Iran fully closed the Strait again (previously they had been allowing a small amount of traffic).
It seems more likely that things are escalating and Oil will go up which is bad for the shorts.
"Not really, but that's alright. Next caller!" - Jimmy Shill
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exactly what happened lol
ETFs don’t work the same way company shares work when it comes to shorts and squeezes. ETFs have created and redeem mechanisms. Most of the time that there are large shorts in ETFs it’s because the etf is trading at a premium over NAV. When this happens, market makers buy the constituents of the ETF, sell the etf short, and simply pocket the premium by doing a “create”. They deliver the constituent basket to the wtf administrator, the etf admin creates new shares and delivers them to the market maker, and the whole trade nets out to zero, leaving the market maker flat and just with the profits from the nav premium.
Etfs and futures don’t work exactly the same way at stock, but if the position moves higher shorts could still get margin called and have to cover
What I’m saying is a big portion of the bowers are likely not naked shorts, likely held by market makers who are short the etf and long a basket of what the etf will become in the next days or weeks, so all they have to do is wait and then do a create and the position will collapse to flat with no additional trading. There is some risk that if prices move wildly before they can collapse the position they could have mark to market losses, but these are big companies with massive amounts of capital (think Jane street), they’re not amateurs at managing their collateral
Thanks for the explanation, I've found it very helpful. Does this mean the market makers assume that the future underlying basket components won't increase much in price, since they will have to use said components to make the basket in the future instead of selling at a profit?
Look at XRT that shits shorted 1100%
This guy shorts.
Are you sure it's possible to create USO shares by delivering the underlying basket to the fund manager? This is not GLD or some trivial shit like that. The USO fund likely has an elaborate mix of oil futures contracts in it - not sure how an outsider would know, what exact basket composition the fund holds at any given point in time (it sure is not constant, due to contract expirations and rolling).
https://preview.redd.it/zivbixwyym6h1.png?width=1126&format=png&auto=webp&s=35cf2982dea2fc5cb11c3e231df5c9421d9090a8
Esplain…You forget that the audience is regarded.
Got it thanks but fuck man, buy a 30DTE ATM call, and USO needs to go up $10 just to break even. Another $10 to double my investment which puts it at all time high… dunno guess I’m too much of a puss to go in.
Call options are likely expensive because of the current backwardation - USO profits (goes up) just from rolling their oil futures contracts forward, even if the oil price stays flat.
You trust that data?
Who do you think is shorting it? You think people with access to those level of shares dont know the risk of being squeezed?
You could make this same comment before every short squeeze
I too think oil will go up but I am not very informed on oil
believe it or not .. calls
USO seeks to achieve its investment objective by investing primarily in futures contracts for light, sweet crude oil, other types of crude oil, diesel-heating oil, gasoline, natural gas, and other petroleum-based fuels.
From Yahoo Finance. It's not 100% WTI.
Wellness check on this guy pls
This your first time being Trump and Dumped?
Just FYI - the futures markets (open interest on any contract) are always perfectly balanced, i.e. for every single short there is exactly one long (i.e. the two counterparties of that contract). This is not like borrowing shares and shorting.
Everyone is taking all this time to explain the mechanics of oil futures (which I have traded for many years)
Are you in this trade or sitting on the sidelines? What are your positions?
Or maybe we just don’t have all the info.
Nobody is talking about Venezuelan oil hitting the market, plus Hormuz is way bigger than it looks on TV, ships are getting through. Trumf is remaking the oil supply market and increasing North and South Americas slice of the oil supply pie. 47d chess
That’s why I only trade financially settled futures.
If I die in a car crash the last thing I want is to accidentally leave my wife 1000 barrels of oil and 60 cows 🐄😄
Counterpoint: https://www.reddit.com/r/wallstreetbets/comments/g5e3e5/i\_bought\_oil\_at\_32\_yesterday\_and\_made\_26000\_sort/
That’s why I only trade financially settled futures. 😄
The last thing I want is to die in a car wreck and accidentally leave my wife a thousand barrels of oil and 60 cows