Hi everyone, With the price of oil definitely not stay where it is, which ETF is the best positioned to capture the gains of a rising oil price? XLE is the first ETF that comes to mind. Any thoughts on this. Thanks, sbn
First thing: I wouldn't be overconfident about oil going up over the short term. There have been $30 and $25 projections. There's a ton of supply, demand is still down, and the OPEC cuts aren't going to fix that any time real soon. And if the overall stock market stays down, then that won't help either.
UAG. Forward contracts on unleaded gasoline. Head & shoulders bottom, less volume means ease of movement, driving season forthcoming. Not quite yet though.
I thought USO might be a good way to slowly build a position in oil , and I started buying (very small) when oil went under $60. My position is still quite small and of course underwater and now I'm wondering if this ETF is broken. Do any of the more knowledgeable members think this ETF will track a rise in oil if there is some crisis that shakes up the oil market ?
I'm not terribly knowledgeable, but from what I know, yes USO would gain value very well if oil spiked up and went in the opposite direction, but it would have to be a really nice move, I think, and that's unlikely unless something drastic happens. Who knows, maybe an OPEC country will create some drama just to drive the price of oil up. Read this, though.
Broken, no. You're on the wrong side of a contango as the underlying futures contracts are rolled over. Each succeeding expiration is about 5 bucks apart (higher). This is "by design" because of the sheer volume of USO comprised of amateurs seduced by a bargain. Until the contango works in your favor, you're apt to lose money. USO's next roll over is March 6th. You might fare a little better in USL but neither is appropriate to be long presently.
im having trouble understanding dxo. the correlation 2x supposedly with the crude oil movement doesnt seem to be correct many days.
XLE doesn't invest in oil but in oil companies. This is not the same thing and often there isn't a direct correlation. If you want to invest in oil then USO is set up to track oil prices with futures.
More reading on contango and negative roll yield http://www.marketfolly.com/2009/01/how-contango-affects-crude-oil-etfs-and.html
I agree that oil will be a good buy eventually. The seasonal tendency is for it to start going up at the end of February, but I am not buying oil as a position trade until it makes a higher high on the daily chart. Right now, the trend (down) is your friend and DUG may be a better buy (with a fairly tight stop).