A big topic of conversation inside The War Room today has been this…

“What’s the best way to short oil?”

And no wonder.

Look at the United States Oil Fund (USO) chart – you’ll see the parabolic move in oil prices over the last week. Check it out:

This is clearly a reaction to the geopolitical news, which makes total sense given the daily chaos. Just today, the headlines remain uncertain, volatile, and alarming.

CNBC reports the following…

Iraq, Kuwait, and the United Arab Emirates, three big OPEC producers, have cut oil output as they run out of storage space. They are unable to export through the Strait of Hormuz due to Iranian threats against tankers. The U.S. war against Iran has shown few signs of easing.

The closure of the Strait has triggered the biggest oil supply disruption in history, according to an analysis by consulting firm Rapidan Energy.

Since about 20% of the world’s oil consumption flows through the Strait, it’s easy to understand why we’re seeing such a massive spike.

But here’s the thing: history shows that maintaining these lofty levels is unsustainable.

That’s why smart traders are moving in…

Yes, oil prices will remain volatile. Yes, we could still see prices continue to spike.

But eventually, we’ll see a reversion to the mean – and that’s where the opportunity lies.

YOUR ACTION PLAN

A cheap (and leveraged) way to play an oil pullback is using April call options on the ProShares UltraShort Energy ETF (DUG).

This index measures the inverse performance of energy companies in the S&P 500, which means any oil price pullback could trigger a bounce in DUG.

When that happens, you could profit by owning April call options.

This was a speculative move we made in the War Room today.