Buying UCO put contracts.
The ProShares Ultra Bloomberg Crude (UCO) is designed to trade oil with 2X leverage. That means if oil rises by 2% in a day, this ETF should increase by 4%.
Oil prices are rolling over as demand from China is in question. And since many traders are already heavily long oil, this selloff could pick up momentum as weak holders are shaken out.
Today, we’ll buy put contracts to bet on a decline in oil prices. This sets up a good reward-to-risk opportunity as these put contracts will certainly retain plenty of value even if oil holds up (because of the volatility in this market right now).