Ask HN: Crude oil price-linked ETF?
7 comments
USO is probably the biggest, most liquid one available in the US.
Almost all of these funds will hold some combination of cash, short term debt and oil futures, with the ratios depending on their target leverage.
Performance between them will vary depending on, among other things: whether or not the ETF is levered, which particular type of crude it's tracking, it's time horizon, and how effective the fund managers are at rolling their futures holdings.
NOT investment advice. Commodities are fickle.
Almost all of these funds will hold some combination of cash, short term debt and oil futures, with the ratios depending on their target leverage.
Performance between them will vary depending on, among other things: whether or not the ETF is levered, which particular type of crude it's tracking, it's time horizon, and how effective the fund managers are at rolling their futures holdings.
NOT investment advice. Commodities are fickle.
In times of cheap oil prices, the forward curve is often in contango.
That means that the price for a prompt delivery is cheaper than a delivery in the future. So if you go long crude with futures, each month you have to roll your contracts before they expire, and buy a more expensive one. So you end up paying a premium.
Kinda like if you want to store oil to speculate, you have to pay for storage.
You might as well buy a basket of oil majors stocks, which are a pure play on oil prices
That means that the price for a prompt delivery is cheaper than a delivery in the future. So if you go long crude with futures, each month you have to roll your contracts before they expire, and buy a more expensive one. So you end up paying a premium.
Kinda like if you want to store oil to speculate, you have to pay for storage.
You might as well buy a basket of oil majors stocks, which are a pure play on oil prices
Agreed, which is why I do not want futures contracts, or any options with a set time horizon. I consider the current price to be a fluke, I am willing to make a significant bet that the prices will recover, but I do not know whether it will take 3 months or 5 years; I am willing to wait it out.
I understand that this will effectively mean paying a "storage premium", but I am looking to minimize such costs by pooling money with a large fund that does this for a living and has tools and agreements that I do not have.
On a basket of oil majors as a proxy: sorry, this sounds suspicious. I think there are a lot of factors beyond oil prices in play which should make those pretty well decorrelated from short term oil price movements. Is this really true? Honest question.
I understand that this will effectively mean paying a "storage premium", but I am looking to minimize such costs by pooling money with a large fund that does this for a living and has tools and agreements that I do not have.
On a basket of oil majors as a proxy: sorry, this sounds suspicious. I think there are a lot of factors beyond oil prices in play which should make those pretty well decorrelated from short term oil price movements. Is this really true? Honest question.
Good list is available here:https://pages.etflogic.io/?pg=cocroi
Note that there are no ETFs that actually hold barrels of oil. USO holds front month futures. So you're also paying a role yield.
Consider equity ETFs like XLE which can provide a beta to crude if you're looking to catch a falling knife
Note that there are no ETFs that actually hold barrels of oil. USO holds front month futures. So you're also paying a role yield.
Consider equity ETFs like XLE which can provide a beta to crude if you're looking to catch a falling knife
If there was a security that perfectly tracked the price of a commodity, why would anyone invest in the commodity?
The commodity, after all, has actual costs (such as storage, insurance, and transport.)
That is, if you were to buy 10,000 barrels of oil, there will be s cost for you to store it. If that cost was absent from the mythical intangible instrument that perfectly tracked oil, why would you or anyone else buy the real thing for investment purposes?
Buying a 'synthetic' commodity -- that is, and instruments thst strives to match the commodities price -- will force you to give up something; maybe the amplitude of the swings in price, or a hefty chunk for transaction costs, or other such things. (I believe 'backwardation' and 'contsngo' are the terms for the factors that prevent a collection of future contract perfectly tracking the percentage delta spot price of the underlying commodity.)
The commodity, after all, has actual costs (such as storage, insurance, and transport.)
That is, if you were to buy 10,000 barrels of oil, there will be s cost for you to store it. If that cost was absent from the mythical intangible instrument that perfectly tracked oil, why would you or anyone else buy the real thing for investment purposes?
Buying a 'synthetic' commodity -- that is, and instruments thst strives to match the commodities price -- will force you to give up something; maybe the amplitude of the swings in price, or a hefty chunk for transaction costs, or other such things. (I believe 'backwardation' and 'contsngo' are the terms for the factors that prevent a collection of future contract perfectly tracking the percentage delta spot price of the underlying commodity.)
Check out BNO. It may be what you're looking for
You could do oil futures/options or basket of oil company stocks.
A simple google search shows several funds with such goals (e.g., on https://etfdb.com/themes/long-crude-oil-etfs/ ), but with different performance over the same time period (both daily and YTD), which looks suspicious.