To The Moon

$United States Oil Fund(USO)$ surged 9.57% on Thursday to close at $118.39, with options markets flashing extreme volatility signals. Implied volatility (IV) climbed to around 120%, while the IV percentile reached near-record highs, indicating traders expect sharp price swings ahead and that option premiums have become exceptionally expensive.

At the same time, block-trade data suggests institutional investors are increasingly exploiting this “panic premium” by deploying option-selling strategies, wagering that volatility will eventually normalize. Open interest data also shows large concentrations of positions around key strike levels, particularly the $120 call.

Recent Market Developments

Oil markets have experienced heightened volatility recently amid geopolitical tensions, shifting expectations around OPEC+ production policy and incoming macroeconomic data.

As an ETF tracking WTI crude prices, USO has mirrored these swings in its share price, which has fed directly into options pricing. Market participants are paying steep premiums for protection against potentially large price moves.

Deep Dive into Options Indicators

Implied Volatility at “Panic” Levels

USO options currently show implied volatility of about 120.21%, far above levels seen across most asset classes. More notably, the IV percentile stands at 99.60%, placing it at the extreme upper end of its historical range.

When IV percentiles reach such levels, it typically signals that option premiums are unusually rich. The IV-to-historical volatility (HV) ratio stands at 2.11, underscoring that the market’s forward volatility expectations are far above recently realized price swings.

Source: Tiger Trade App

Open Interest Positioning

Open interest data centered on contracts expiring March 20, 2026 offers a revealing snapshot of market positioning.

Total call open interest stands at 192,561 contracts, significantly exceeding 125,861 contracts in puts, leaving the put/call OI ratio at 0.65—a sign of a strong bullish tilt in accumulated positions.

Notably:

• The $120 strike call (USO Mar. 20, 2026 $120 Call) holds 16,914 contracts in open interest, suggesting many traders see the ETF testing that level.

$USO 20260320 120.0 CALL$

• The $135 strike call has 15,464 contracts in open interest, reflecting either aggressive upside bets—implying a potential rally of more than 14% in the near term—or heavy call selling by institutions seeking to harvest premium at elevated volatility levels.

$USO 20260320 135.0 CALL$

Block Trades: Institutions Split Between Short-Term Bulls and Long-Vol Sellers

Large options trades highlight a divergence in institutional strategies.

Aggressive Bulls: Heavy Buying of Short-Dated Calls

Some traders are piling into near-term calls to gain leveraged exposure to a potential rally:

• Purchase of 4,875 deep in-the-money calls expiring Mar. 20 with an $83 strike, costing roughly $355,600, representing a high-conviction directional bet.

• Purchase of 5,200 out-of-the-money calls expiring Mar. 27 with a $125 strike, wagering on a sharp move higher next week.

• Purchase of 3,000 calls expiring Apr. 17 with a $111 strike, positioning for a medium-term upside move.

Source: Tiger Trade App

Premium Harvesters: Selling Calls in the High-IV Environment

Other traders appear to be taking the opposite side, capitalizing on elevated implied volatility by selling calls:

• Sale of 1,800 Mar. 20 calls at the $135 strike.

• More notably, 1,036 July 17 calls at the $130 strike were sold, collecting about $195,500 in premium.

Source: Tiger Trade App

This trade suggests some investors believe that while short-term sentiment is overheated, the probability of USO rising above $130 within the next four months remains relatively low, making the sale of longer-dated calls attractive amid elevated volatility.

Strategy Takeaways

The USO options market currently reflects a classic combination of extreme volatility expectations and strong bullish sentiment. With implied volatility near historical peaks, options have become expensive, raising the cost for buyers but offering substantial premium income for sellers.

For investors who expect volatility to revert lower or believe upside may be limited, volatility-selling strategies may be worth considering. One example would be selling longer-dated, far out-of-the-money calls—such as July expiries with strikes above $130—where the probability of assignment is relatively low.

To avoid the unlimited risk associated with naked call selling, traders could construct spread strategies. For instance, selling the $130 call while buying a higher strike call such as the $140 call would cap downside risk and form a vertical call spread.

Directional traders, however, should proceed with caution. With option premiums already elevated, underlying prices would need to make unusually large moves for long option positions to become profitable.