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United States Oil ETF Message Board

  • ahhbarnicals ahhbarnicals Jan 12, 2009 6:21 PM Flag

    USO is holding the March Contract... Contago is coming

    When the February contract expires oil is going to spike 5 dollars (b/c thats about the difference b/w the February and March contracts).. however this does not mean USO will spike when this happens (b/c it is holding march contract not February contracts).. so oil is going to spike ~5 dollars a barrel and USO will have further fall... I am probably going to buy this after the February contracts expire and March oil (and USO) tanks from the 5 dollar adjustment. I'll only hope to hold my position for ~1 wk or 10% profit. To avoid the next months contago and subsequent fall in USO.. That is the terrible thing about this fund for the longs... When oil is falling like a rock and the contracts roll over and oil increases $5 a barrel.. it only makes room for USO to fall further... Buy at your own risk..

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    • You don't know wtf you are talking about.

      The Jan. contract that expired in December closed near $34, and USO was at $27. The Feb. contract was then near $42 and dropped to currently $37-$38. But USO is up to above $31. If the Feb. gets to $34 at close, USO is going to be above $27...where it was in December.

      This contago thing is HIGHLY overrated.

      • 2 Replies to gator_391
      • it matters on how long you hold uso, for example, this month on jan 2nd, uso closed at 35.63, while nymex feb(what uso was tied to at the time) closed at 46.34, since that day and across the uso rollover until yesterdays close, where uso closed 30.65 and mar nymex(what uso is tied to now) closed at 43.65, so over that time and across uso's roll, uso lost 14%, while the nymex price that uso is tied to only lost 6%

        so for people expecting to put this away in their 401k and come back a year later and be rich, they need to be aware that the amount of contango over the course of their holding the trade will affect the performance...and right now that amount of contango is pretty significant, because everyone and their brother is sure that crude is moving up significantly this year...

        on another note, i admit that i was wrong about what uso tracks, i was told and thought it was always front month, but after digging into it with uso again directly, found out it tracks whatever it is holding at the time, and it only holds front month about half the time, otherwise it holds next month out

      • you are wrong. USO dropped to $27 after last months contago.... When the January contract expired and oil adjusted to +5$ a barrel uso of course did nothing (b/c they were holding the February contracts).. and the market saw that the global economy wasn't ready for a $5 increase in oil and in the next few days oil fell back to to around January contract prices which meant USO fell along with it (all the way down to $27/share)... Trust me I KNOW.. I was invested in USO when all that happened, but got out on the GAZA/Israel spike and fortunately made a profit. Expect the same thing to happen this month with contago, only it could be worse b/c the difference b/w February/March contracts is $7 (ouch) instead of $5
        Best of luck to all...

    • February contract was down 8% today...USO was only down 5%. Reason is...USO owns the March contract, which only fell 5% today. I'd rather deal with the risk of "time value" piece of the options declining (March contract currently has a $6 premium over February and represents the time value piece of the option) rather than take the full loss on the front contract. Everyone keeps posting "contango! contango!" in an attempt to scare investors. The fact of the matter is the contango effect is minimized by the contract rolling over 2 weeks before expiration, therefore minimizing losses on the front month contract. That minimizing effect offsets any potential risk of rollover associated with contango

      Oil has fallen from 147.27 to 37.59 from peak in August to today's closing price, which represents a 74.4% decline. USO in parallel has fallen from 119.17 to 30.65 from peak in August to today's closing price, also a 74.4% decline. Contango is not a factor as the USO strategy aims to minimize the effects of contango and so far from its August high it has done so

    • Tef...

      Whats your next move on the DXO..??

      Do you trade OIL..???


    • oh, i forgot, you were the one who thought he was smarter than uso's prospectus, your post just reminded me of that fact...

      you will have to pardon me if i choose to get my facts directly from uso rather than from someone on a yahoo board who thinks he is smarter than the funds own prospectus....

      and it ultimately does NOT matter what the fund holds, they could hold pig bellies and all that would matter is that they hold enough value of those 'pig bellies' to correctly mirror the relative movement of whatever they are trying to replicate on a day to day this case, spot cushing...

    • We should see USO test the low this week inlight of the nasty earnings, and pre-
      Obama lull. I'll buy around $28.00, or I won't, depending on the oil Gods! IMO

    • looks like the Feb contract expires Jan 22. Can anyone confirm this?

    • yes, have no clue why oil mkt is pxing in $6, or 16% premium for march over feb...agree that basically means march has room to fall by that amount, and probably will...along with uso...oil futures strip too bullish for this environment, which makes oil RIPE for disappointment...

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