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Here is why ETFs suck
- Thread starter Relleum
- Start date
Quote from mynd66:
So you are saying going long the ETF is not the best idea. What about for a short play? Or as was asked options for a long play? I mean what is the actual benefit to buying the ETF if it doesn't perform up to its full potential?
Options will still be subject to the contango and would not perform any better than the underlying on average.
Short the ETF would be better.
I do not see much benefit to the ETF, which from the point of view of futures traders is a huge lumbering long-only mark, forced to roll over a huge number of contracts on a predictable schedule (although the ETF has taken steps to diversify its roll-overs to mitigate that). Prices adjust ahead of time to facilitate filling the other side of the ETF's anticipated roll orders.
Quote from comintel:
Options will still be subject to the contango and would not perform any better than the underlying on average.
Short the ETF would be better.
I do not see much benefit to the ETF, which from the point of view of futures traders is a huge lumbering long-only mark, forced to roll over a huge number of contracts on a predictable schedule (although the ETF has taken steps to diversify its roll-overs to mitigate that). Prices adjust ahead of time to facilitate filling the other side of the ETF's anticipated roll orders.
Why doesn't price adjust to the anticipated adjustment?
Quote from Cutten:
Why doesn't price adjust to the anticipated adjustment?
What I am saying is that the ETF (or anyone else) will get a lousy fill when they enter a massive roll order. (Of course they try to space it out etc.)
The ETF owns a significant percentage of the long positions in the front month.
Quote from comintel:
What I am saying is that the ETF (or anyone else) will get a lousy fill when they enter a massive roll order. (Of course they try to space it out etc.)
The ETF owns a significant percentage of the long positions in the front month.
Ah ok, I misunderstood your point.
Still, the post was "Here is why ETFs suck", then it pointed out something that doesn't even apply to most ETFs (which buy & hold, rather than roll each month). Also, I would imagine most traders of USO aren't capitalized enough for the futures contracts. For them it's a choice of pay for the roll slippage, pay slippage in the options, or don't trade oil at all.
Quote from Cutten:
Ah ok, I misunderstood your point.
Still, the post was "Here is why ETFs suck", then it pointed out something that doesn't even apply to most ETFs (which buy & hold, rather than roll each month). Also, I would imagine most traders of USO aren't capitalized enough for the futures contracts. For them it's a choice of pay for the roll slippage, pay slippage in the options, or don't trade oil at all.
Right and the original poster could have (hopefully did) made some good money in the ETF if he was long recently, even if not as much as he would have liked.... so he should not feel too bad.....
Quote from Relleum:
I thought USO would be an easiest and purest non-futures play to go long oil. As you can see by the chart, USO took all of the losses this year hand-in-hand with light sweet crude, but now is severely lagging when it is time to head higher. All the risk, and half the rewards.
What a scam.
Why would you want to buy & hope anything that's in a downtrend?
Second, USO isn't the only ETF that focuses on crude, nor is it the best in terms of relative return to the others.
Third, you simply have to get yourself unignorant if you want to have any hope of survival in this game...
http://www.marketfolly.com/2009/01/how-contango-affects-crude-oil-etfs-and.html