Is USO a good way to invest long term in OIL?

ducatista said:
its actually a very good way to invest in oil. unfortunately, theres alot of misinformation circulating by seekingalpha /motleyfool types who dont understand a damn thing about structured products, term structure, 'roll yield' (most abused term ever), etc.

the most common one being 'uso suffers from contango decay'. it does not.

specifically, its designed to track CL futures. not spot. go plot the 2 and you'll see the difference is largely negligible. IIRC its about 30 basis points mostly due to transaction costs incurred when rolling, part of which is offset by the treasuries it holds. management fee is the other fee that drives this minuscule wedge.

as such, comparing USO to spot as commonly done is false equivalence. spot excludes any cost of storage and just reflects last trading price. however, nobody, not even producers, manufacturers, energy companies, etc, can own spot as is, because they still need a place to store the physical commodity. spot prices are largely an apparition.

future prices on the other hand come w storage already baked in. so if you want to compare uso to something, compare it to the futures that it tracks. not spot.
More...

-- thanks!
 
ducatista said:
its actually a very good way to invest in oil. unfortunately, theres alot of misinformation circulating by seekingalpha /motleyfool types who dont understand a damn thing about structured products, term structure, 'roll yield' (most abused term ever), etc.

the most common one being 'uso suffers from contango decay'. it does not.

specifically, its designed to track CL futures. not spot. go plot the 2 and you'll see the difference is largely negligible. IIRC its about 30 basis points mostly due to transaction costs incurred when rolling, part of which is offset by the treasuries it holds. management fee is the other fee that drives this minuscule wedge.

as such, comparing USO to spot as commonly done is false equivalence. spot excludes any cost of storage and just reflects last trading price. however, nobody, not even producers, manufacturers, energy companies, etc, can own spot as is, because they still need a place to store the physical commodity. spot prices are largely an apparition.

future prices on the other hand come w storage already baked in. so if you want to compare uso to something, compare it to the futures that it tracks. not spot.
More...


----------------

I agree, if you plot both USO and /CL -- the difference is hardly negligible!
 
sjain100 said:
----------------

I agree, if you plot both USO and /CL -- the difference is hardly negligible!
More...
%%
It sounds like you agree with his motly fo*l rebuke.Pardon my sarcasm/LOL
Looks like USO tracked Tx tea badly in 2008/$120 , but my data wrongly showed $120. I see from USO annual report it went up to about $150, so OK.
Looks like most traders will lose money trying to trade this long term; unless you trade it like ERX, use 5 hour charts...…………...…………………......………………. + sell/close it sooner rather than later.LOL
Exspense/ETF exspense seen a bit high=$11, 000,ooo+ a bunch of other stuff ; but 00.84 % is about average for levereged stuff.
Its chart looks like nat gas etfs x3; trade it seldom is the best way to profit from it;wisdom is profitable to direct
 
Over approx 99 days, both (USO & /CL) declined by approx the same % as can be seen in the chart below? Seems very negligible.
Are we talking longer time frames like years where there lies a huge difference?
upload_2020-4-16_18-7-15.png
 
sjain100 said:
Over approx 99 days, both (USO & /CL) declined by approx the same % as can be seen in the chart below? Seems very negligible.
Are we talking longer time frames like years where there lies a huge difference?
View attachment 225230
More...

I have a bear call spread on USO expires 15jan21, I'd like to ride it down and buy back the short side when it's out of the money. I would like to end up long USO by June.
I am one of the fools that read the Seeking Alpha article on Contango.
I must admit, in futures contracts I know just enough to be dangerous.
Can you explain the divergence from 08-09?
Does rolling front month contracts just effect long term investment over long periods of time?
Does supply and demand of the shares of the ETF have any effect on price?


upload_2020-4-16_20-10-6.png
 

Attachments

  • upload_2020-4-16_19-7-35.png
    upload_2020-4-16_19-7-35.png
    442.5 KB · Views: 5
Last edited:
It looks like the May contract expires today or Monday. The June is trading at $25 or $7 above the about to expire May. Whats spot price? Why hasn't the June contract greatly narrowed the spread with the May contract. So that means Monday they'll be quoting the $25 June contract? I'm confused . People will say wow oil was just $18 and now its $25? Makes no sense why the may and June premium did narrow to maximum $1 before the May contract is gone.
 
You must log in or register to reply here.
Back
Top