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Options traders make big, bullish bets on crude oil

Options Action: Traders betting USO could rally

After bucking the broader markets and finishing higher in Tuesday's session, crude oil is coming back to Earth thanks to dashed stimulus hopes and rising U.S. stockpiles. If the options market has its way though, oil could be back in the green before the week is out. 

Traders are playing crude oil through the U.S. Oil Fund (USO), an ETF that tracks a basket of crude oil futures, and they're betting that the beaten-down fund could start playing catch-up quickly. 

"We did see two times the average daily call volume there. The most active contracts were the [Oct. 9] weekly 29-strike calls, over 6,000 of those traded for an average of 35 cents," Optimize Advisors CIO Michael Khouw said Tuesday on CNBC's "Fast Money."

Those contracts would have broken even about 3% above Tuesday's close but are now farther out of the money given Wednesday's pullback.

USO was trading about 1% lower in Wednesday's session, while WTI crude oil was trading about 3% lower.