Please help me undersatnd USO

Discussion in 'Stocks' started by freewilly, Dec 26, 2008.

  1. Depends on how you bring up the chart. On a think or swim 60 min, it's obvious how the USO was up today.

    But if you bring up a daily, it shows the WED close higher than today's close. Not accurate.

    Look at different timeframes, as it is definitely deceiving.
     
  2. seauouch

    seauouch

    Contango is your answer.
     
  3. ummm....You're all wrong. Contango? WTF? That's something totally different.

    1. Crude fell A/H wed and USO had already closed.

    2. USO is NOT directly correlated to crude. Read the make-up. USO also is reflective of gas.....etc.
     
  4. Its not contango... In this case, it was because crude fell off the barrel (heh) after equities close on Weds. So it gapped down after close and gapped back up. Look at the after hours action to see... Remember crude on nymex closes 2:15pm while on Weds USO closed at 1:00pm.

    And yes, on another point of another pressure to unwind USO value, contango that is exaggerated is absolutely erosive to the USO. USO only tracks front month, so if after every rollover the crude contract front corrects down $2, USO feels it whereas spot price continuous doesn't look so bad.

    If you want to buy oil long term, buy the stocks that get cash flow based on oil price, or enter a drilling partnership (privately). Otherwise, USO is a trading vehicle.

    Strong backwardation can help USO recover, but I wouldn't count on it.
     
  5. Thanks,

    Freewilly
     
  6. I stand corrected.

    But the charts comment still stands.