04-22-2020, 09:24 PM
(04-20-2020, 06:17 PM)john Wrote: Looking for more nickels.
What is USO? I get that its a oil ETF and that its very cheap, is it price of oil only that makes it move?
Was away from computer today and missed the oil meltdown today. Looking to either sell a PUT on it or maybe just buy 100 and sell a CALL.
On a sidenote my brother works for Marathon, fairly high up. When Saudi Arabia and Russia got into a pissing match I asked him what his breakeven was he said $42 /barrel they were makin a little $ High $30s they were starting to lose.
Until yesterday, USO was an ETF that invested almost exclusively in the front month futures contract for West Texas Intermediate crude (/CL). It did a decent job of tracking along with the price of WTI during relatively ordinary market conditions, but was always subject to the sort of roll yield that goes along with such ETF structures (contango or backwardation, depending).
As of yesterday, no one knows what the hell USO is with any real degree of certainty. They've changed the structure of the fund three times in less than 48 hours. They no longer have SEC authority to issue new shares to fund futures contract purchases (probably because they were controlling over 30% of the front month futures contract, which was causing its own dislocation in the oil market). So, it's basically a closed-ended fund now, trading at a premium to NAV.
On top of that, the fund managers decided that allowing the fund to follow the value of WTI down to 0 or negative territory was not something they wanted to happen. So, rather than being 80% front month, 20% second month holders (itself a relatively recent change from all front-month rolled on a regular basis, IIRC), the fund is now some blend of futures contracts or other WTI derivatives, constituted completely at the daily whim of fund managers. It is no longer tracking WTI spot in any meaningful way, as a survival tactic. USO is now a black box. Putting any money into USO at this point is basically walking up to the roulette wheel and guessing red or black.