Oil Traders Turn to ‘TACO’ Options as Iran Tensions Spike

An unusual options trade is gaining popularity among oil traders as a hedge against sudden shifts in US President Donald Trump’s stance on Iran. The strategy, nicknamed “TACO,” allows investors to profit from sharp market reversals that have repeatedly whipsawed crude prices in recent months. The TACO hedge—short for “Tail-Asset Correlation Options”—is designed to pay off when oil markets make unexpected U-turns. Traders are using it to protect against the risk that Trump’s aggressive rhetoric on Iran could suddenly soften, or vice versa, causing rapid price swings. This approach has become a favored tool as geopolitical tensions with Iran escalate. The options are cheap, making them accessible for traders who want insurance without paying a premium for traditional hedges. Analysts say the growing use of TACO reflects deep uncertainty in the oil market. With Trump’s policies often reversing course, traders are seeking flexible protection against volatility.