🕒 Market Overview: Oil prices retreat from June highs as geopolitical tensions ease temporarily

🔄 Sector Insight: Distillate refining margins surge while gasoline spreads compress, signaling supply imbalances

💰 Today's Trade Idea: Bear Put Spread on USO targeting seasonal gasoline demand decline

SMART TRADE IDEA

Bear Put Spread on USO

Trade Setup: Buy $75 Put / Sell $65 Put, January 16, 2026, expiration.

• Cost:  $3.55 ($355 per spread)

• Max Profit:  $6.45 ($645 per spread

• Breakeven:  $71.45 on USO on January 16, 2026.

Management Plan: Exit at 50% loss, roll down or take profits if USO’s price reaches $65 per share.

Expect lots of volatility in crude oil and oil product prices over the coming months. The offseason for gasoline could drive WTI crude oil prices and the USO ETF product lower.

NOTE: Remember, options trading involves substantial risk and is not suitable for all investors. Consider your investment objectives, financial resources, and experience level before implementing this or any options strategy.

DISCLOSURE: Trade recommendations may have changed since publication. Evaluate current market prices and risk/reward before acting. Trading involves significant risk and is not suitable for everyone. This is not personalized investment advice. Past performance doesn't guarantee future results. Publisher and contributors may hold positions in recommended securities. Readers assume full responsibility for their trading decisions. Consult a financial professional before investing.

MARKET BREAKDOWN

Macro Lens – Big Picture Market Forces

Energy markets face multiple crosscurrents heading into the final quarter. Geopolitical volatility remains elevated across key supply regions, while OPEC+ production increases add supply pressure. U.S. energy policy shifts toward increased domestic output create additional headwinds for prices. China's economic trajectory will determine global demand patterns, with recent data showing mixed signals. The VIX equivalent for oil markets - crude oil volatility - remains elevated above seasonal norms, reflecting persistent uncertainty around supply disruptions and demand patterns.

Sector and Stock Watch – Identifying Key Movers

WTI crude oil futures demonstrate technical weakness as the market transitions from peak driving season into winter months. The spread relationship between WTI and Brent crude reveals important supply dynamics, with Brent maintaining relative strength due to European and Middle Eastern supply concerns. Gasoline crack spreads have compressed significantly, indicating ample WTI supplies for refining, while heating oil margins expanded, reflecting tighter distillate markets. This divergence signals that WTI-linked products face greater downside pressure than Brent-based petroleum products.

Trading Strategy in Focus – How to Play the Market

Seasonal patterns favor weakness in gasoline-linked crude oil products during winter months. The USO ETF, which tracks WTI futures, faces headwinds from declining gasoline demand and increasing domestic production. Bear put spreads provide defined risk exposure to capitalize on expected downside movement while limiting maximum loss potential. The January expiration aligns with the heart of winter driving season decline, offering optimal timing for the trade thesis to develop.

Notice: Today is unique! We are sharing two different trade ideas for SPY…

Crude oil prices have declined from the June 23, 2025, high and are sitting in the middle of the trading range from the April low through the late June high in September 2025, with November Brent futures at near the $64 level, and October WTI futures around $67 per barrel.

The United States Oil Fund (USO) tracks NYMEX WTI crude oil prices. At $74.48 per share, USO had nearly $900 billion in assets under management. USO trades an average of over 4.28 million shares daily and charges a 0.81% management fee. During the April 9-June 23 rally, NYMEX futures for October 2025 delivery moved 37.4% higher. Over the same period, the USO ETF moved 37.75% higher from $60.67 to $83.57 per share.

 The United States Brent Oil Fund (BNO) tracks ICE Brent crude oil prices. At $30.21 per share, BNO had over $110.8 million in assets under management. BNO trades an average of over 596,000 shares daily and charges a 1.09% management fee. During the April 9-June 23 rally, Brent futures for November delivery moved 30.1% higher. Over the same period, the BNO ETF moved 34.9% higher from $24.71 to $33.33 per share.

 The USO and BNO ETFs trade during U.S. stock market hours, while the NYMEX WTI and ICE Brent futures trade around the clock. Therefore, the ETFs can miss highs or lows when the stock market is closed.

We should expect continued volatility in oil prices over the coming months for the following reasons:

 ·  The geopolitical landscape remains highly volatile.

·  OPEC+ is increasing output.

·  U.S. energy policy will ramp up production.

·  China’s economic growth or contraction will determine if demand increases over the coming months.

·  Crude oil’s trend is sideways with a bearish bias, but given the Middle East’s volatile nature, the potential for periodic upside spikes remains high.

·  The oil market is moving into the offseason for gasoline demand, which could weigh on prices during the colder months.

Since gasoline demand will fall during winter, the NYMEX WTI futures could reflect the weakness more than Brent futures over the coming months. Moreover, since Brent futures are the benchmark for European and Middle Eastern crude oil, geopolitical factors could favor strength in ICE Brent futures and weakness in NYMEX WTI crude oil futures. Therefore, with the USO ETF at the $74.50 level, the $75-$65 vertical bear put spread for expiration on January 16, 2026, could offer value at an over 1:1.8 risk-reward ratio.

TRADE SMARTER WITH TRADIER

A Brokerage Built for Options Traders

Tradier offers fast execution, direct API access, and seamless platform integrations—all with a flat-rate subscription model that eliminates per-contract commissions. Trade on your terms with a brokerage designed for serious traders.