We highlight bullish call buying in the options market that coincides with a recent price run up in the largest (in terms of assets under management) Crude Oil based ETF, U.S. Oil Fund (USO) , in our options recap this morning.
USO has been around since 2006 and now has approximately $1.3 billion in AUM and trades nearly 9 million shares per day on average.
PowerShares DB Oil (DBO) is the second largest Crude Oil futures based ETF, having amassed over $600 million in assets under management and trading more than a half a million shares per day.
However, today we highlight one of the least known ETFs in the Crude Oil space, Teucrium WTI Crude Oil Fund (CRUD) which is relatively new to the ETF landscape.
The fund launched in February of 2011, and the index methodology was designed specifically to mitigate the effects of contango and backwardation that are present in the futures markets typically.
Thus, holders of USO for instance over the long term since 2006, have noticed a significant disconnect in the real returns generated by the ETF versus the actual spot price movements of Crude Oil the commodity itself.
This purely results from contango issues which, as the fund “rolls” futures contracts into the open market on a monthly, pre-planned basis, returns are literally eaten up during this process over time.
DBO in fact was designed with a different methodology, not unlike CRUD where a “blend” of futures are generally used within the fund and rolled in such a way to mitigate the effects of contango and/or backwardation.
Year to date, we see that USO has fared the worst in this group, which is not at all surprising. USO is down 11.67% versus DBO down 8.67%, and CRUD, despite its very low average daily volume and tiny asset base, is down only 7.87%.
Teucrium WTI Crude Oil Fund
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- Crude Oil