Following the entry " oil ETFs, I decided to write this second part. In that I focused more on leveraged ETFs, the differentiation between ETFs and TNCs, and the difficulty of achieving an alleged revaluations oil market in contango (plus bass).
I read the comments, which unlike what I meant, more people are interested in long-levered ETFs, among which the most widespread are USO and DBO.
there are many oil ETFs. The one I try either is basically for being the best known and therefore liquid, but the existing supply is immense. Liquid ETFs recommend looking for us to come and go as they pay as little as possible between the bid and offer prices. USE fork is now at 0.03%, and BOD about 0.5%. The difference is quite important for those who use them for trading. For those who think about taking long term positions is not as important. Regarding the costs of trading, also is good to note that there are many brokers that charge a percentage by size of operation, but a fixed cost per share. To make trading in ETFs through these brokers would be more appropriate to an ETF with a higher price than an ETF with a lower price.
The management fee is 0.5% in BOD and 0.45% in USE. As we see, almost identical. Then we must add the cost of fees the fund, a value much lower.
What is USO? Is the United States Oil Fund, whose business card can be found here , which has a portfolio of WTI futures March 2009.
What is BOD? Is the PowerShares DB Oil Fund, whose business card can be found here , which replicates the behavior of DBLCI-OY CL, and therefore must take WTI futures portfolio maturing in June 2009.
below includes comparison charts DBO, USO and USL, both during the bull market, as in the current bearish. USL explained what it was in " oil ETFs."
During the bull market we see as not very different behavior, although performance is somewhat lower USE. USL behavior appears to replicate more USO faithfully for most of the movement, but on top of the USL market profitability is well above the USO, and similar to the BOD.
During the bear market is more apparent the worst performance of the USO, and here it is definite that we believe the effect of contango, and that USO has a portfolio of futures maturing, while USL has a portfolio of futures of the next twelve months and the BOD is due June 2009. The contango situation accentuated the bill seems to happen in the long term USE. Anyway, the USO would be chosen for short trading, as its minimum fork allows us to operate at lower cost. Yes, keeping oil prices current contango disappear, USO would benefit, while BOD and above all, USL, would depreciate their contracts beyond. Widen further the contango would be preferable BOD or better USL. USL, as we noted, has the problem of relatively low liquidity, with a range too wide at times.
As soon as I said a reader, "Oil ETFs " I did not mention the effect of currency risk. I did for two reasons. First, because I am convinced that everyone is aware that oil priced in dollars, and second, because I do not usually cover foreign exchange transactions in commodities, because usually their price bears some correlation with the EURUSD, which cover can be counterproductive. I mean, to buy "X" oil, buy dollars. What must I do to cover it? Buy "X" EURUSD. In this way I suppose if the dollar down (my investment in oil), rising from my EURUSD is going to compensate the effect of the devaluation of the currency of my investment. But it often happens that gold and oil rise when the EURUSD rise, and fall as low. With what is easily when going up the dollar (euro low, my low coverage), oil is also down, and that when the dollar falls against the euro (my cover up) Oil rises as well. I'll try to explain it more simply, suppose that oil go up exactly the same as the EURUSD. Oil rises, but as my currency, the euro, rises as well as the oil price in euros does not change. Then we would not need coverage. Obviously false that they are fully correlated, but loosely correlated to causes that I usually do not use currency hedges with oil or gold.
(See also: The curious behavior of ETFs)
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