Today oil March contracts are up about 8.20%, from $34.62 to $37.70. These contracts expire tomorrow February 20. So what happens today with USO and UCO? Take a look:
USO is up 5.4% The reason is that USO just switched to April contracts.
In the process, by the way, USO sold at the March prices and bought at the April prices. So the same amount of money they had, now own fewer equivalent barrels of oil, about 20% fewer! If oil continues in contango, the same loss will happen in about 4 weeks.
So the poor investors who bought USO got to ride all the losses for the month and today do not rip the rewards.
How about UCO? That is a 2X ETF!
Buyer beware cannot be said loud enough.
Here are the contract calendars (please click to enlarge):
To avoid all these issues (you may have better chances at a casino), you may instead use straddles. We have been doing UCO straddles since UCO was at $12, which was just a few days ago.
Note: these were the 6-6 straddles published yesterday at 9:35AM at http://straddles.nexalogic.com:
This is currently breaking even, let's see how they do by tomorrow.
Thursday, February 19, 2009
Buyers of USO Beware
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February
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- Paul Volcker's Speech In Toronto
- Stay Away from 2X ETFs, Cause and Effect Relations...
- Don't Buy USO or USL, Buy UGA Instead
- UCO Straddles: Proof of Concept
- Mitsubishi Shifts Production from Japan to Brazil,...
- Unemployment in the USA From 2007 to 2009
- Job Market for 2009
- Protect Yourself: Straddles for March
- February Max Pain Update, Demystifying MaxPain
- President Barack Obama Visits Canada
- Update on USO and March Oil Contracts
- SPY and IWM Options Action Today, Max Pain in Prac...
- Buyers of USO Beware
- Max Pain for February, Price Convergence Watch
- Correlation of the Dow 30 Stocks
- UCO Straddles for This Week and March
- Snow Artists, Protectionism, and Obama Visits Canada
- World's Oil Production: Top Consumers and Producer...
- Updated UCO and USO Straddles
- Results for UCO, USO, UNG Straddles
- Straddles for Oil and Natural Gas, USO, UCO, UNG
- Oil Consumption To Drop to Lowest Levels in 27 Years
- Straddles for February 9 and 10
- The Tale of USO, USL and Contango.
- AKAM, AMZN and WY Straddles Analysis
- Ice Artists
- UCO Straddle Results
- Catedral Bar Offers Madoff drinks
- Straddles for Tomorrow Friday
- UCO Straddles for February and March
- The DJIA, DOW 30... or is it the DOW 15? A Skewed ...
- SunLife Insurance Straddles
- Straddles for the Week of February 2 to February 6
- Straddles Report for the Week of January 26 to Jan...
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