The United States Oil Fund LP (USO) is a NYSE Arca-listed exchange-traded security whose shares can be bought and sold. The daily % changes in the net asset value (NAV) of USO’s shares should match the daily percentage changes in the spot price of light sweet crude oil delivered to Cushing, Oklahoma, as determined by the daily changes in the Benchmark Oil Futures Contract. USO aims for the average daily percentage change in USO’s net asset value to be within plus/minus 10% of the average daily percentage change in the price of the Benchmark Oil Futures Contract over any 30-day valuation period.
A BENCHMARK OIL FUTURES CONTRACT OR LIGHT SWEET CRUDE OIL INVESTMENT IN USO SHOULD NOT BE CONSIDERED A LIGHT SWEET CRUDE OIL INVESTMENT.
USO IS NOT A PROXY FOR TRADING DIRECTLY IN THE OIL MARKETS, AND THESE RISKS ARE REAL.
The Benchmark Oil Futures Contract is the NYMEX’s near-month West Texas Intermediate (WTI) crude oil futures contract for light, sweet crude oil delivered to Cushing, Oklahoma, unless the near-month futures contract is within two weeks of expiration.
USO generally invests in listed crude oil futures and other oil-related instruments, but it may also participate in forwards and swaps. Cash, cash equivalents, and US government liabilities with remaining maturities of two years or less will be used as collateral for these investments.
The Benchmark Futures Contract and oil futures contracts for light, sweet crude oil traded on NYMEX and ICE Futures with the same maturity month as the Benchmark Futures Contract have historically helped USO achieve its investment goal. Until recently, USO’s requirement to invest in crude oil futures contracts other than the Benchmark Oil Futures Contract was limited. Market conditions, changing regulatory requirements, and risk mitigation measures introduced by certain of USO’s service suppliers have forced USO to invest with more discretion than it has previously. Specifically, the considerations compelling USO to exercise additional discretion during April 2020 included, but were not limited to:
- USO’s investments in the Benchmark Oil Futures Contract and the ICE WTI Contract were subject to responsibility levels and position restrictions established by NYMEX and ICE Futures.
- The capacity of USO to invest in the Benchmark Oil Futures Contract was hampered by its futures broker.
- In a relatively short period of time, a considerable number of USO shares were purchased.
Due to these occurrences, USO’s ability to invest a significant amount of its assets in the Benchmark Oil Futures Contract was significantly hampered. As a result, on April 17, 2020, USO began investing in oil futures contracts other than the Benchmark Oil Futures Contract, in accordance with its prospectus authorization. Despite improved crude oil market conditions and the addition of new futures brokerage relationships that give USO more trading capacity, the company continues to invest in oil futures contracts other than the Benchmark Oil Futures Contract, and only invests in the Benchmark Oil Futures Contract on a limited basis.
As a result of the foregoing, USO is currently unable to pursue its investment objective with the same level of success as it has in the past, prior to the aforementioned market conditions. Furthermore, there is considerable uncertainty as to whether USO will be able to achieve the same level of success as before in accomplishing its investment objective as a result of such market conditions, regulatory limits imposed on USO, and the risk mitigation measures discussed below. USO’s limited ability to invest in the Benchmark Oil Futures Contract, combined with its investments in oil futures contracts other than the Benchmark Oil Futures Contract, has impacted and may continue to impact its performance, making it difficult for USO to closely track the Benchmark Oil Futures Contract or meet its investment objective of having the change in its NAV for any period of 30 consecutive valuation days be within plus/minus t. The price differential between the Benchmark Oil Futures Contract and USO’s per share NAV could approach 10% in the future, and has done so in the past on a daily basis. For example, in April 2020, changes in the NAV of USO differed by -16.527 percent from changes in the price of the Benchmark Oil Futures Contract. USO would not have accomplished its declared investment aim if the deviation had maintained for 30 consecutive valuation days. Despite the fact that there were deviations greater than plus/minus 10% on a few days in April, as shown in the chart below, titled Rolling 30-day average difference between USO’s NAV and the Benchmark Oil Futures Contract, this trend did not continue on a rolling 30-day basis, and USO met, and continues to meet, its investment objective. For more information on the impact of recent events on USO’s performance in April 2020, see the current prospectus on the website.
USO’s investing discretion parameters are outlined and explained in length in the prospectus. USO has the authority to adjust such criteria if regulatory regulations, market conditions, liquidity requirements, or other considerations necessitate it. On the portfolio holdings part of the website, USO discloses its portfolio holdings as well as its investment plans in terms of the type and percentage of investments in its portfolio.
- Intra-day pricing, as well as market, limit, and stop orders, are all available through USO.
- Each day, USO publishes its portfolio holdings, market price, NAV, and TNA on its website. It also posts USO’s target portfolio for the end of the roll or any rebalance on the internet each day, based on market conditions and regulatory requirements.
Is USO a decent exchange-traded fund (ETF)?
The USO ETF (NYSEARCA:USO) has a great chart and solid fundamentals. Purchase it. According to the most recent OPEC oil market report, the following demand outlook: Despite some offsetting revisions, world oil demand growth in 2021 remains unchanged from last month’s estimate, at 6.0 million barrels per day.
Is it safe to invest in the USO ETF?
Mike Venuto, co-founder of Toroso Asset Management, an ETF advising firm, says, “USO is one of the most risky ETFs you can purchase, and you’ll now pay a premium to acquire it.” A request for comment from the USCF was turned down. A warning label has always been required for commodity ETFs like USO.
How does the USO ETF generate revenue?
The fund primarily invests in front-month crude oil futures contracts, which it must roll over every month. 1 If it holds WTI crude oil futures contracts that expire in September 2020, for example, it must roll them over and buy those that expire in October 2020.
How do I purchase an oil ETF?
You can invest in oil commodities in a variety of ways. Oil can also be purchased by the barrel.
Crude oil is traded as light sweet crude oil futures contracts on the New York Mercantile Exchange and other commodities markets across the world. Futures contracts are agreements to provide a specific quantity of a commodity at a specific price and on a specific date in the future.
Oil options are a different way to purchase oil. The buyer or seller of options contracts has the option to swap oil at a later period. You’ll need to trade futures or options on oil on a commodities market if you want to acquire them directly.
The most frequent approach for the average person to invest in oil is to purchase oil ETF shares.
Finally, indirectly investing in oil through the ownership of several oil firms is an option.
Is USO keeping track of oil prices?
The USO is designed to track the WTI futures spot month contract’s price movements. The positions on the front month contract will be carried over to the second front contract if it is less than two weeks away from expiration.
Because of its rollover schedule, USO has a different WTI exposure than the WTI front month futures contract. The USO exposes nearly half of its pricing exposure to the second front month contract price since it rolls over its front month contract two weeks before it expires.
The performance of the USO has historically differed slightly from that of the WTI front month contracts. Despite the USO’s best efforts to replicate the front-month WTI price, roll yield, transaction expenses, and management fees cause performance to diverge from WTI spot prices.
Can the USO make a comeback?
Is the price of USO set to $5.50 for the next year and a half? At the very least, this trade suggests that possibility. As a covered call, some upward potential is given up in exchange for the short call’s income. In this example, the call’s yield over the life of the trade is 17.3 percent (about 20 months).
Even after 20 months, that’s not a bad yield in current economy. Given how inexpensive USO is, there’s also little risk in this deal. However, because this isn’t the first time a large ETF/ETN has blown up, there may be some counterparty risk. This is a rather safe transaction to make if you are ready to take a chance that USO may rebound to some level by 2022.
Before you make a deal, get the “10-Step Options Trading Checklist” for free.
What exactly is the USO ETF?
The United States Oil Fund (NYSE Arca: USO) is an ETF that tries to track the price of West Texas Intermediate Light Sweet Crude Oil. It differs from an exchange-traded note (ETN) in that it represents an ownership claim on the fund’s packaged underlying securities. Oil futures contracts are exchanged on regulated futures markets, and USO invests in them.
Is it a bad idea to put money into oil?
Investing in the oil and gas business entails a variety of risks. Commodity price volatility, dividend cuts for corporations that pay them, and the likelihood of an oil leak or other mishap during the extraction of oil or natural gas are three of these risks. Long-term investments in oil and gas companies, on the other hand, can be extremely beneficial. Before investing in the sector, investors should be completely aware of the hazards.
The USO strengthens America’s military service members by keeping them connected to family, home and country, throughout their service to the nation.
The USO has been the nation’s foremost organization for serving the men and women in the United States military, as well as their families, since 1941. The USO is by their side from the moment they join, through their assignments and deployments, and as they return to their communities.
Today’s USO is always adapting to the demands of our service members and their families so that they may focus on their critical mission. We run USO centers at or near military stations around the country and around the world, including in war zones, as well as unstaffed USO service sites in areas too dangerous for anyone other than combat soldiers to enter.
Traveling military members and their families can enjoy round-the-clock hospitality at USO airport centers across the country. Our signature USO trips bring America and its superstars to service members stationed far from home to entertain them while also conveying the nation’s support. And, from the first moment they put on the uniform to the final time they take it off, our various specialized programs provide a continuous stream of assistance to military members.
The USO is a non-profit organization that is not affiliated with the federal government. The USO is a privately funded, congressionally chartered organization that relies on the generosity of individuals, organizations, and companies to fund its activities. Our purpose of connection is carried out by a family of volunteers.
USO is a type of stock.
The United States Oil Fund, or USO, is an exchange-traded fund (ETF) that tracks the daily price fluctuations of WTI light, sweet crude oil. “Daily changes in percentage terms of its shares’ NAV to reflect the daily changes in percentage terms of the spot price of light, sweet crude oil delivered to Cushing, Oklahoma, as measured by the daily changes in price of USO’s Benchmark Oil Futures Contract, less USO’s expenses,” according to the firm’s website.