US Oil (USO): Selling the Stalemate While the Fairy Tales Fight
Promised money holds up the AI tape while oil sits in a chop zone neither side can afford to end; how options price that stalemate.
What came of it
The Trade Alert on USO closed on 7 May 2026, after 10 days, at +60% on the capital at risk.
Confidence as the Only Collateral
The letter opens with a pair of chief financial officers running the same trick. Sarah Friar at OpenAI has told her board she worries the company cannot fund the $1.5 trillion in compute it has pledged, because revenue keeps arriving below plan. Scott Bessent at Treasury is offering open-ended dollar liquidity to the UAE, Korea and any holder of greenbacks willing to stay put while America fights its war. Different floors, identical architecture: pledge money you do not yet have so the people buying now keep buying, and hope the music lasts another lap.
Semiconductors have gone weeks without a down session, the SOX floats above its long average by a margin last seen at the dotcom top, and the AI complex prices Altman's pledge as bankable cash. Microsoft, which knows OpenAI's books better than anyone, rewrote its deal on the day Friar's worry leaked, dropping the revenue share and its exclusivity. Hyperscaler shareholders sit still while chip recipients fly. That gap maps who still believes and who is edging toward the door.
Underneath, the mechanical bid is turning into a mechanical offer. Goldman's month-end pension model shows roughly $24 billion of US equities for sale, while the CTAs who bought all month have gone quiet. Systematic supply arrives just as earnings risk peaks and capex consensus, already enormous, has to keep climbing to avoid reading as a slowdown.
The Chokepoint and the Bursting Tanks
Which brings the letter to oil, sitting in a chop zone where each side has too much to lose to end the argument. Tehran believes it controls the chokepoint; Washington believes Iranian storage is within days of overflowing. Goldman has lifted its Brent call for the final quarter to $90, and JPMorgan's arithmetic says prices stay high long enough to force the demand cuts nobody wants to own. Tension, rather than any resolution, is what holds the price up.
The tapes that hurt sit at the extremes: a surprise ceasefire that dumps crude overnight, or an escalation that sends it vertical. The tape that pays is the one already on the screen, choppy and boxed inside a wide range on USO. A stalemate is dull to trade directionally and rather pleasant to trade as a range.
Paid While the Fairy Tales Fight
For an options trader the useful fact is where the fear lives on the curve. Front-month oil options carry the war premium because every headline lands there first; the wings further out are cheaper. The structure the letter calls the Egyptian Camel sells that rich near-term volatility and owns the cheaper deferred wings against it. The stalemate becomes the income, and the fairy tales, ceasefire or escalation, become risk you have already defined.
It rhymes with the tactics the letter sets out for the whole tape: respecting the AI trend without chasing vertical semis, favouring defined-risk spreads, booking gains sooner than pride would like, and holding protection while volatility still quotes politely. Fewer heroic speeches in front of moving trains. An oil range financed by front-month premium is that instinct wearing a different ticker.
Central Banks Meet the Hyperscalers
The catalysts arrive stacked. Every major central bank decides in the same handful of days that Alphabet, Microsoft, Amazon and Meta report, with the capex line mattering more than any earnings beat; a flinch from any of them on Wednesday night reprices semis, power, cooling and copper before Thursday's open. Thursday itself brings core PCE and advance GDP, the pair of prints most capable of reintroducing stagflation to a market that has not budgeted for it.
Further out: whether Microsoft keeps rewriting its OpenAI arrangement, whether Friar's private worry becomes a stated funding gap, and how Beijing's block on Meta's Manus purchase colours next month's Trump and Xi meeting. For oil, attention belongs at the edges of the range and on any headline claiming the chokepoint story or the storage story has finally won. Until one does, the stalemate keeps paying whoever priced it.
This page is the write-up. The full letter, with the trade and its exit rule, is on Substack.
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