US Oil fund ETF – USO is changing how they invest the funds of the ETF. I’m going out on a limb here and guessing that since UWT delisted, a lot of money may have jumped into USO. USO is marginable, so traders can buy 3x the amount, using their margin account causing 3x the gains/losses just like UWT. This amount of money in 1 ETF has come to $3.8 billion in funds invested in 1 contract of CLM20. USO is holding almost 150,000 CLM20 contracts, making it very persuasive to the contract price. At the same time if USO doesn’t manage the funds exceptionally well or one of the many events that are probably listed in the USO prospectus happen, USO could start receiving margin calls, causing them to dump contracts; in turn, causing the price to tank, causing more margin calls, causing the price to tank further. Sound familiar? XIV went from near $100 to $6 or something from one day to the next.
I’m not saying I know what I’m talking about, I’m just saying if you are trading USO like I am, be prepared for anything. Also, read the USO prospectus, don’t take my word for anything.
Just be fair warned that there are a list of events that can happen in any ETF, they are listed out, because the ETF creator is smart enough to know the scenarios that can cause total destruction of the ETF. These scenarios are listed in the prospectus to make you the trader aware so you cannot easily sue them when you claim they lost you a lot of money, when in fact they warned of such events in the prospectus.
Ok… I’ve said enough in my redneck lingo. I hope all this settles down soon and I can get back to normal, boring fundamentals again. If I’m completely wrong about what I’ve said above, please feel free to correct me in a kind manner.
I’ll be holding my 10% USO position, but it’s only 20 shares, keep that in mind if you are also trading USO. I can only lose roughly $100 at this point. Good luck