$3.6bn crude bet puts price on stupidity

[FrankInLa]

Exactly. And the only reason June and farther contracts are priced higher was because of the expectation of a very short low price shock in spot. As there is a mathematical relationship between futures as well as forwards and spot those near month prices converge to spot at expiration. The pnl is purely realized within same month expires. The price difference between different expires does not factor at all into pnl unless someone trades the spread outright which is not the case here.

I get your point about "The futures curve remains constant", but it's the spot price which the front month price converges to at expiration (Which does not usually appear in the futures curve mostly).

Even if the futures curve remains constant in spreads between expires, you buy Jun CL for $35 & Jul CL is at $40, your Jun CL will settle somewhere down near WTI spot at say $15 (By that time maybe Jul CL will be at $20 (Same $5 difference), which can settle later at any price ($10 maybe, $20, $25, you guess).

Besides, the futures curve is never static, the curve is always moving & the spreads are very dynamic

 

[themickey]

Link to above on robin hood platform?

https://robinhood.com/collections/100-most-popular

https://www.ccn.com/investors-who-buy-this-u-s-oil-etf-are-about-to-lose-a-lot-of-money/

 

[cruisecontrol]

This is simply not true. You buy the near month then you close out the near month. Next you purchase the far month and rinse and repeat. Pnl is realized WITHIN each contract month not across months.

What is it about this thread that brings out all the people lacking in reading comprehension skills? if the futures curve remains constant, that means the near price has converged to the original far price by expiry. Then your "within contract" PnL is equivalent to the difference.

 

[themickey]

https://www.marketwatch.com/story/t...e-biggest-losers-2020-04-21?mod=mw_quote_news

Because of the upheaval in the oil markets, USO in mid-April decided to stagger its exposure to oil prices by investing in different contracts spanning subsequent months. On Tuesday, with markets in freefall, it smoothed that exposure even more: the fund will invest approximately 40% of its portfolio in crude oil futures contracts for June, approximately 55% of its portfolio in contracts for July, and approximately 5% of its portfolio in contracts for August.

“In addition, commencing on April 22, 2020, USO in response to ongoing extraordinary market conditions in the crude oil markets, including super contango, may invest in the above described crude oil futures contracts on the NYMEX and ICE Futures in any month available or in varying percentages or invest in any other of the permitted investments described below and in its prospectus, without further disclosure,” the issuer said in an SEC filing announcing the changes. “Significant tracking deviations may occur above and beyond the differences described herein.”

It takes about two weeks for USO to “roll” its contracts, or shift its assets to later-dated ones, a process well-known to institutional participants in the marketplace, Nadig noted. It’s important to note that on Monday, when the previously unthinkable happened and May contracts for West Texas Intermediate crude oil went negative, USO had no May exposure.

 

[FrankInLa]

There is no such concept of a "constant futures curve". The term does not even exist. You are changing your point and seemingly try to obfuscate the discussion. But I am glad you concur at long last. The fund does not incur losses because it has to roll the current expires into the next expiries. This is what the article suggested and which does not hold true. You disagreed with me and now you seem to be on the same page. All good.

What is it about this thread that brings out all the people lacking in reading comprehension skills? if the futures curve remains constant, that means the near price has converged to the original far price by expiry. Then your "within contract" PnL is equivalent to the difference.

 

[themickey]

Biggest oil ETF USO down 11% midday Wednesday
Published: April 22, 2020 at 12:55 p.m. ET
By Andrea Riquier

The United States Oil Fund LP USO, -8.71%, the largest oil exchange-traded fund, on midday Wednesday had lost 11% of its value, sending its weekly losses above 40%. The fund has buckled under the weight of a massive sell-off in oil futures, caused by a global glut and dwindling storage. USO's issuer has tried smoothing its exposure to any one month's futures contract, but losses have deepened anyway. On Wednesday morning, it announced it would reverse-split the stock eight for one on April 28. In the year to date, USO shares are down more than 80%.

https://www.marketwatch.com/story/b...-11-midday-wednesday-2020-04-22?mod=home-page

 

[zdreg]

https://robinhood.com/collections/100-most-popular

List does not include ETFs.

 

[cruisecontrol]

There is no such concept of a "constant futures curve". The term does not even exist. You are changing your point and seemingly try to obfuscate the discussion. But I am glad you concur at long last. The fund does not incur losses because it has to roll the current expires into the next expiries. This is what the article suggested and which does not hold true. You disagreed with me and now you seem to be on the same page. All good.

Starting to think you're a troll at this point. You could just be a moron though. If you want to delude yourself into thinking you've won some kind of argument here, be my guest. Your ramblings don't change the obvious fact that persistent contango means the fund will continue to underperform spot over time, as it has done in the past: https://www.investopedia.com/articl...way-invest-oil-uso.asp#historical-performance

 

[zdreg]

you're a troll at this point. You could just be a moron though.

Troll and moron can describe the the same individual There are some highly multi-talented individuals on ET.
FrankInLa is neither. He thinks outside the box, whether you agree or disagree with him.

 

[themickey]

List does not include ETFs.

Oh deary me.....

Mom and Pop Piled Into Biggest U.S. Oil ETF During Historic Rout
By
Luke Kawa and Katherine Greifeld
April 22, 2020, 11:51 PM GMT+8 Updated on April 23, 2020, 12:55 AM GMT+8

• Number of users holding USO more than doubled since Friday
• ETF has plunged more than 30% with oil turning negative

The historic rout in oil this week has done little to deter mom and pop investors who are convinced they can see a bottom for the beleaguered commodity.

The number of investors at retail trading platform Robinhood piling into the biggest oil ETF, the United States Oil Fund LP (USO), spiked to 152,073 at the end of Tuesday, according to Robintrack, a website unaffiliated with the site that uses its data to show trends in positioning. That figure was up more than 50,000 from Monday and 90,000 from the end of last week, making it the most-added security across the trading venue.
https://www.bloomberg.com/news/arti...ept-flooding-into-biggest-oil-etf-during-rout