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United States Oil ETF Message Board

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  • godiggity123 godiggity123 Jan 12, 2009 11:20 PM Flag

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

    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

 
USO
17.00-0.410(-2.35%)Jan 23 4:00 PMEST

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