USO barely moved? I know this has to do with Jan contract rolling over to Feb contract, but what if on Monday, oil goes from $42 to $36 again for whatever reason, then USO will go much lower even though oil price went back to $36?
How does this make sense where USO gains nothing from the contract rollover jump from $36 to $42 in oil price and yet will go down if on monday oil trends down again from a newly reset higher level of $42?
Am I misunderstanding this?
common people, what's the real deal here? Is that really how this and other long crude oil ETF works?
I mean this isn't the first month that oil has trade like this right? What happened last time when this higher rollover pricing happened? E.g. from december to Jan, which I'm sure was also trading higher than Dec price at the time.
It works the other way too though. They have the Feb contract right now. When we roll into March, March might be cheap than Feb by then.
Yes, it's based off futures so its risky business.
What I'm doing is selling the options against my position which helps offset some of the risk.
Please don't panic. It works going the other way too some months. Once oil turns around you will see this same benefit going the other way. Like a few months ago Oil prices spiked to 120 even though next month futures were only trading around 100. You won't see any big fluctuations in USO based on the monthly rollover though.
oh lord, this is terrible news for me, this is not what I wanted.
I can see this game be the ruins of everyone buying this ETF and other similar ones.
If oil keeps going higher on this artificial rollover business but with actual gains on the oil ETFs when this happens.
Then it's mostly downside from here!