thanks for posting. if i understand correctly, options on original USO should be made whole once "the cash in lieu of fractional USO Shares is determined." i'll wait til middle of next week before i contact IB on this issue.
You should contact them now, as these adjusted options are trading and you should be able to close your position.
You will likely only be allowed to close out the pre split options so if you want to add you would have to do that with the new options. USO has been slaughtered but they made changes to keep it from dying because it makes them so much money. Your options are still there but now you just have to multiply by 8. Which ones are you holding?
Thanks for the feedback! I have the Jan 15'21 $3 Call (part of a strangle - already closed my Oct Puts). I decided to keep the calls in case there's some kind of opec/government intervention and the price of oil rapidly recovers. I'm not feeling much time pressure.
So you have 630 days or so for USO to get over $24... I think I would hold onto that. In general I don't like holding USO because of how it is invested instead so I'm usually sell ICs on it but I'm avoiding it for now. I did purchase a Dec 2022 leap spread that I decided to hold +4c / -10c so slightly better than a lottery ticket.
No worries...You've just entered into a master limited partnership. Hopefully you have enough room in your back yard to take possession of all that oil!!
USO will only be a good buy if and when all the millennials on Robinhood puke out of their USO longs. Millennials are like the George Costanza of trading/investing.
if you're implying my USO calls could somehow result in me needing to take delivery of oil you're sorely mistaken. Being long USO calls (as part of an option strategy) is not the same as holding WTI future contracts until expiration. That being said, it is pretty funny seeing posts, "how do I accept delivery of WTI?". As far as I see it, in the worst case scenario whereby I cannot trade my USO calls, it will be closed upon expiration for 0, or if USO is trading above $3, for whatever it's worth.
Yeah, it was a joke...But this is not!! From a USO post I responded to earlier last week. Does the government treat LLPs different than other ETFs? Yes!! If a LLP is liquidated, does it send a red flag to the IRS? Yes!! I have been audited 3 times...All with my wife. We had our ducks lined up in a row with my CPA before we went in. IRS auditors are not very bright. They want to find unpaid taxes quickly then move on. You could be there an hour explaining an unwound LLP (and not knowing what you're talking about). The auditor may reject your answers and say you had full knowledge of the LLP and may owe more in taxes. Or may ask for a revision of your taxes. Both cost money. You may need to hire a tax professional. I said may...LLPs CAN be tricky. When I had USO and showed my CPA the end of year statement, he suggested I get out of it and never return to that company. Yeah, so tell it to my CPA...He must be an idiot!! Yes, you are correct on the first part...But down the road, headaches could be ahead. If I remember...If the LLP does get unwound and it creates over $1,000. to your account, you need to file an extra 4 pages of documents to the IRS. Turbo Tax or H & R Block may not know what they are doing. Edited 5 minutes later. I went to Fidelity to buy 1 share of USO (just to see what would happen), no, I didn't buy. Below is the response...They are covering their ass. Error:(DI2002) You are placing an order for a security that requires you to execute Fidelity's Designated Investments Agreement for this account. Review and execute the Designated Investments Agreement, and review important information about this investment. If you do not agree to the terms of the agreement and review the important information, you may not purchase this security. For important information on these securities and their risks, see Master Limited Partnerships . One more thing from Schwab... Taxes on distributions not received. According to the SEC, MLP unitholders may still need to pay applicable taxes even if the MLP doesn’t provide the unitholder with cash distributions. For example, “if debt owned by an MLP is discharged in a restructuring or bankruptcy, the amount of debt discharged may be treated as income,” meaning investors may owe income taxes despite not receiving a cash distribution.5 A restructuring or bankruptcy is rarely a good thing for investors, but in the case of MLPs it can add an additional headache when it comes to taxes. State taxes. According to the SEC, investors may need to file state tax returns in states that the MLP operates in, even if the investor doesn’t live in that state.6 MLPs held in retirement accounts. Sometimes an MLP will generate unrelated business taxable income, or UBTI, which could lead to a tax bill even if the MLP is held in a tax-deferred individual retirement account (IRA). While the income earned in a retirement account is generally tax deferred, UBTI may actually be taxed in an IRA. In other words, an investor holding an MLP in a retirement may still owe tax. If an MLP is held in a tax-deferred retirement account, it’s usually up to the MLP unitholder to send the Schedule K-1 to the IRA or retirement account custodian. Could USO go under... If you thought the collapse in oil prices this week was bad, next month could be “fundamentally worse,” with prices falling to -$100 a barrel, says one energy strategist. “Oil is difficult to handle and if you can't put it anywhere, it becomes an environmental liability literally. So over this next month storage is now effectively full, you could see some extreme negatives in terms of prices offered,” Paul Sankey, managing director at Mizuho Group, told Yahoo Finance. “The problem in the market today is really one of infrastructure and storage. Of course the biggest problem being that demand is down at absolutely previously unseen levels in the modern era,” said Sankey. Crude prices could go negative again as 40 million barrels of Saudi oil are currently on route to the U.S. The shipment was agreed upon in March before much of the economy came to a grinding halt amid COVID-19. “Those barrels take 45 to 60 days to arrive. And we can see this a flotilla of tankers that are coming towards the U.S. market ... We really can't handle it at all.”
IB was very certain it would be impossible to place any initiating orders. Only liquidating orders would be accepted. FSU, if you can expend new capital on USO1 options, would be please buy mine off of me at a fair price? Because the market in these options seems unregulated. As soon as options opened for trading the day after the reverse split, USO1 Call options traded for $ 0.01 when they were $.35 the preceding trading day, and on an up day in USO1. As the day progressed, the calls put in a bit of a bid at $.10, still way below their counterparts in USO. I asked IB who would be taking the other side of my sell order in these calls. His response was that it was no market maker, just holders of short positions in these calls. Until they are thin on margin, they can just set the bid price to anything they want. I think this is a terrible scam on the part of USO (or is it the OCC). Overnight, these options went from being very liquid to nearly illiquid, but not because this is a thin market. No one can initiate new orders to buy or short these options! Only the pool of those with existing open interest can trade to each other. I think it's amazing that this is allowed. How do I sue?