August USO, XLE Put Options Active

I just checked out today's option activity on $USO and $XLE and found big out of the money August put volume. USO (oil ETF) closed at $37.41 today and 9,370 August $37 puts traded with 192 open and 25,897 August $34 puts traded with 2,209 open. Call action was minimal. XLE (energy stock ETF) also had large out of the money August put action. XLE closed at $47.03 today and 12,836 August $45 puts traded with 333 open.

The volume/open interest ratio was very wide on these trades. So were these trades speculative out of the money longs or sellers? Lets say these ballers were long. Using XLETS (XLE Aug $45 Put) $1.99 premium at the close, traders dropped $2,554,364 for the right to sell 1,283,600 shares of XLE at $45 which would make profit < 43.01. I'm sure OptionMonster has information on the actual ticks. XLE broke below the 50 and 200 day moving average and the Oil Volatility Index ($OVX) gathered strength recently (chart below). This could be a crazy summer for the energy sector. Watch out for hurricanes in the Gulf and/or volatility in Tehran.

The American Petroleum Institute released a report today on gasoline and crude stockpiles and I'm sure traders are setting up for the Department of Energy report tomorrow. The Fed announcement will also directly affect oil prices via the US Dollar.

ARTICLES:
UPDATE 1-US gasoline stocks surge as refiners ramp up-API (Reuters)
Oil Drops Below $69 as U.S. Gasoline Gains, Japan Exports Fall (Bloomberg)
UPDATE 1-IMF economist sees no further sharp oil price rise (Reuters) (Interesting)

USO August Puts (Courtesy of Scottrade)

XLE August Puts (Courtesy of Scottrade)

OVX (Oil Volatility Index) (Courtesy of Stockcharts.com)