The Fund is a commodity pool issues units that may be purchased and sold on the American Stock Exchange. It engages in the speculative trading of futures contracts and options on futures contracts.
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These funds -- which are really limited partnerships -- are primarily investment vehicles to enrich the fund managers. Maintenance costs are huge drags on the performance of the fund, and so when the price of oil is not outpacing these costs (and it will not in the long term), you are losing money. If oil gets spanked, then this fund may have a function. I made RL money off it when oil rose from $60 up to $80. Any time frame over a couple of months, there are much better vehicles for profiting from increasing oil prices.
GV:
Where can I get costs assoc with this fund and what other oil-based funds would you recommend a look at?
Thx.
S
You need to do some digging to get the drag on these funds because they are not fixed costs. They may be substantially lower than for UNG because demand for oil is not outstripping production so much as it is for natgas. You are best off looking at news articles and/or blog posts (here on CAPS) for UNG to get a sense of hidden costs and drag on these funds. There are probably fewer articles tagging USO because oil has been on a better run.
My recommendation is to play oil by buying stocks -- or funds of stocks -- that actually are involved in production, exploration, processing, and oil sector services. Today is a particularly good example of why you want to own these companies rather than USO. Oil, and USO, are down, but well-run companies like STO are rocketing up. I am not too up on ETN/ETF names for the oil sector but check the holdings before you buy and make sure they are holding strong companies!
I agree with Gunnar. I bought this when oil was $64 a barrel. Now 2 years later, oil at $103 a barrel, I'm still at -15% return. Clearly this USO does not track even near-linearly with actual oil prices. I'd sure like to find an asset or asset class that literally correlates with barrel prices.