Here's an interesting article (along with comments) that addresses some of what I have pointed out in regards to USO over the past few weeks: https://ftalphaville.ft.com/2020/04/21/1587478056000/Can-the-USO-fund-collapse--/
So what's worse? Being long USO or NYMEX WTI June20. USO can only go to zero. CL Jun20 can go to negative -$40 or even lower. Listing of negative option strikes on CL futures can introduce panic short gamma futures selling when Jun20 dips below zero.
I'd say long USO is worse because of the premium but I get where you are coming from. If I had a gun to my head I would go long the future and an OTM put with it.
I just read about this 1 for 8 reverse stock split and I'm not sure this if this is a good thing? Sounds like it just makes a plummeting stock cost more? But may jump a bit with a surge of new investors by creating additional volume? https://finance.yahoo.com/news/uscf-announces-one-eight-reverse-114500706.html
It makes sense for them to do this given the price. I wonder if this is also a way for them to resume accepting new creation units and issuing new shares of the ETF if the request they made with the SEC is not approved. If that is the case, it should help keep it's price / NAV from getting too out of wack.
Current short interest rate is 18%, you run the risk of the rate going much higher or becoming unborrowable.
It does have options, which I know because I bought a bunch of $.50 strike puts on it yesterday after agreeing on your theory. So you can avoid the unborrowable issue with puts although you obviously still pay the 18% in broken put/call parity.
Good point. I think if you bought the .5's yesterday they are a great trade vs. a long term hold. As I mentioned they really blew up yesterday, pricing better than a 50% chance of liquidation, I actually sold my longs out and went short them. Buying back today and going long them again as they seem cheap.