ProShares UltraShort Bloomberg Crude Oil (SCO) Covered Calls

ProShares UltraShort Bloomberg Crude Oil ETF is a leveraged inverse exchange-traded fund that seeks daily investment results, before fees and expenses, of 200% of the inverse of the daily performance of the Bloomberg WTI Crude Oil Subindex. The fund utilizes financial derivatives, primarily swap agreements and futures contracts, to create a leveraged short position against the price of light sweet crude oil. It is intended for short-term trading and tactical hedging by sophisticated investors.

You can sell covered calls on ProShares UltraShort Bloomberg Crude Oil to lower risk and earn monthly income. Born To Sell's covered call screener gives you customized search capabilities across all possible covered calls but here are a couple of examples for SCO (prices last updated Mon 4:16 PM ET):

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ProShares UltraShort Bloomberg Crude Oil (SCO) is a geared financial instrument designed for traders who maintain a high-conviction bearish outlook on the energy commodity markets. The fund aims to deliver twice the opposite daily return of the Bloomberg WTI Crude Oil Subindex. For example, if the price of West Texas Intermediate (WTI) crude oil futures decreases by 1% in a single day, the fund is engineered to increase by approximately 2%, before accounting for management fees and expenses.

Because the oil market is subject to intense volatility driven by geopolitical events, production quotas, and global demand shifts, this fund serves as a powerful liquid tool for hedging energy-heavy portfolios or speculating on price corrections. However, as a leveraged inverse product, it resets its exposure at the end of every trading session. This daily rebalancing means that over periods longer than one day, the fund’s returns can deviate significantly from the simple inverse of the index due to "volatility decay" or compounding effects.

Portfolio Strategy and Synthetic Exposure

The fund achieves its objective through synthetic exposure rather than physical storage of crude oil. The portfolio primarily consists of short positions in WTI crude oil futures contracts and swap agreements with major global financial institutions. These derivatives allow the fund to gain leveraged short exposure to the "front-month" futures price, which is the industry standard for oil pricing. To maintain this exposure, the fund systematically "rolls" its contracts, a process that can impact performance based on the shape of the futures curve.

Competitive Landscape

The fund competes with other commodity-linked ETFs and the stocks of major energy producers. Key competitors and related optionable securities include:

1. ProShares Ultra Bloomberg Crude Oil: The direct 2x long counterpart to SCO, used by traders to bet on rising oil prices.
2. United States Oil Fund LP: The primary non-leveraged benchmark for WTI crude oil prices and a major reference for SCO traders.
3. Energy Select Sector SPDR Fund: A broad-market energy equity benchmark that often moves in high correlation with the crude oil sub-index.
4. Occidental Petroleum: A major domestic oil producer whose stock performance is frequently impacted by the same factors driving this fund.
5. SPDR S&P Oil & Gas Exploration & Production ETF: A liquid sector competitor representing the companies most sensitive to the commodity price fluctuations SCO tracks.

Strategic Outlook and Market Dynamics

The strategic utility of the fund is highest during periods of global oversupply, economic contraction, or rapid shifts in energy policy toward renewables. As a transparent and liquid exchange-traded product, it provides a regulated alternative to complex futures accounts or over-the-counter derivatives for gaining short oil exposure. The fund’s performance is intimately tied to the decisions of major oil-producing nations and the overall health of the global industrial economy.

Management focuses on maintaining tight daily tracking of the target index and high secondary market liquidity. While the secular trend toward decarbonization may impact long-term oil demand, the sector’s propensity for cyclical volatility ensures a continued market for inverse products like SCO. Sophisticated investors use this fund to navigate these cycles, providing a means to profit from commodity price contractions that would otherwise negatively impact traditional energy-weighted investment portfolios.

Want more examples? SCM Covered Calls | SCSC Covered Calls