Here's why, and what you should do about it. USO faces issues separate from regulators’ investigations. Luckily for the USO, it was already investing in June and July contracts by that point, but over the next week, the fund made four more changes to its portfolio: Data source: United States Oil Fund LP 8-K filings. Basically, the United States Oil fund is designed to offer a way to invest in U.S. oil without having to purchase futures contracts on a mercantile exchange yourself, or buy stock in a specific oil company like Conoco or Chevron. NOW WATCH: Why Pikes Peak is the most dangerous racetrack in America, Registration on or use of this site constitutes acceptance of our. “This difference is because unlike with stocks, a futures contract cannot be held indefinitely in hopes that a fallen price will recover.”, — With assistance by Jack Farchy, and Alex Longley, SEC, CFTC examining whether shareholders knew potential risks, Investigations preliminary, may not lead to enforcement cases. Let's conquer your financial goals together...faster. All rights reserved. As the largest exchange-traded fund with direct exposure to the price of U.S. oil, shares have fallen nearly 83% so far this year. Issues the agencies are examining, the people said, include whether shareholders were adequately informed that the ETF’s value wouldn’t necessarily move in tandem with the spot price of oil and the fund’s recent decision to purchase crude contracts that expire further out in the future. But on April 17, that changed. Michael Gayed's fund relied on just one market signal to book a huge profit when the coronavirus crushed stocks — and his returns are still soaring. All rights reserved. USO has issued six disclosures to shareholders in the last two months noting changes to the fund’s investment strategy, which it has had to quickly rejigger in response to recent events. It's yet another reason to steer clear of the oil industry for now. Looking for new stock ideas? When benchmark WTI crude oil prices turned negative on April 20, the fund found itself in an uncomfortable position. Fundamental company data provided by Morningstar and Zacks Investment Research. Returns as of 11/12/2020. The USO ETF is "still trading and able to rebalance and roll its portfolio," United States Commodity Funds CEO John Love said, according to FT. USO has seen an explosion in popularity among traders. It also announced an intention to invest in contracts as far out as June 2021. Currency expert Nick Giambruno explains why it could lead to America's next wave of prosperity for prepared investors. Updates USO closing price in paragraph 7, updates with USO signing Marex Spectron as new broker in paragraph 13. Fully 40% of the fund's portfolio is now going to be for contracts more than three months out. The shifts have led to concerns that USO could become increasingly disconnected from the spot oil price that it’s long sought to track. Data from Robintrack.net shows that the number of Robinhood accounts that own the USO ETF surged more than 2000%, from ~8,000 in early February to more than 170,000 today. Here’s Why. These less sophisticated shareholders are among those who’ve endured heavy losses amid the oil rout, a plunge highlighted by the commodity’s first-ever slide into negative territory on April 20. He seeks growth and value stocks in the U.S., in Germany, and beyond! USO Stock Quote, and financial news from the leading provider and award-winning MarketWatch.com. © 2020 Verizon Media. He breaks down his simple approach to crisis investing. “The value of the shares in the commodity pool may not track the value of the underlying asset over time,” the CFTC said in its May 22 statement. Read More: For Creators of USO ETF, Troubles in Market Began a Decade Ago. Such extreme concentration prompted CME to inform USO in late April that it was placing limits on the fund’s holdings of June, July, August and September contracts. Stock quotes by finanzen.net. 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Over the last two weeks, the fund has made some extraordinary changes to its portfolio, including dumping all its current oil futures contracts in favor of longer-term investments. Cookie Notice. Copyright © 2020 MarketWatch, Inc. All rights reserved. Learn more. Do Not Sell My Information. © 2020 Market data provided is at least 10-minutes delayed and hosted by Barchart Solutions. Basically, the United States Oil fund is designed to offer a way to invest in U.S. oil without having to purchase futures contracts on a mercantile exchange yourself, or buy stock in a specific oil company like Conoco or Chevron. Historical and current end-of-day data provided by FACTSET. There are currently no items in this Watchlist. View our full suite of financial calendars and market data tables, all for free. USO's investment objective is to track a benchmark of short-term oil futures contracts that closely reflect the spot price of crude oil. In other words, at the beginning of March, USO bought futures contracts for April delivery (the shortest-term contracts available). 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Following unprecedented volatility in the oil markets, which briefly caused oil prices to turn negative last month, a wildly popular trading ETF has been barred by its broker from buying or holding oil futures contracts. Information is provided 'as-is' and solely for informational purposes, not for trading purposes or advice, and is delayed. They also had this to say in their April 27 8-K filing: "While it is USO's expectation that at some point in the future it will be able to return to primarily investing in the Benchmark Futures Contract or other similar futures contracts of the same tenor based on light, sweet crude oil, there can be no guarantee of when, if ever, that will occur.". Its WTI holdings became huge in March as oil plunged, a drop triggered by falling demand during the coronavirus pandemic and a price war between Saudi Arabia and Russia. In less than two weeks, the largest U.S. oil ETF -- which has the stated objective of tracking current oil prices -- went from 100% investment in June 2020 WTI futures contracts to 0%. 'It works for anything I look at': BlackRock's bond chief who oversees $2.3 trillion shares the 'really simple' 3-part framework that guides every investment decision he makes - and outlines 2 factors he looks for in a company.
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