b********t
发帖数: 8181 | 1 Contango and Cash
YOU HAVE TO GO back to the future if you're thinking of investing in the
United States Oil Fund (USO: 25.60, -0.53, -2.02%).
Since its launch Monday, there's been a lot of hype over this exchange-
traded fund, which is billed as the first equity vehicle that allows stock
investors to play the price of oil. But a look under the hood shows that it'
s not that simple. In fact, it's pretty darned complicated, and its ultimate
value will come not from where a barrel of crude trades | b********t
发帖数: 8181 | 2 Contango and Cash
YOU HAVE TO GO back to the future if you're thinking of investing in the
United States Oil Fund (USO: 25.60, -0.53, -2.02%).
Since its launch Monday, there's been a lot of hype over this exchange-
traded fund, which is billed as the first equity vehicle that allows stock
investors to play the price of oil. But a look under the hood shows that it'
s not that simple. In fact, it's pretty darned complicated, and its ultimate
value will come not from where a barrel of crude trades today, but where it
's expected to trade over the next several months.
First, it's important to note that USO isn't, strictly speaking, an ETF at
all. ETFs generally hold baskets of securities and trade all day on an
exchange just like stocks. Most track indexes. It's a fairly simple process:
Managers buy and sell the stocks underlying the indexes and, voilá, you
have an ETF. With commodities, it's a bit different. Instead of stocks,
commodity ETFs own the underlying product. For example, the two gold ETFs,
the StreetTracks Gold Trust (GLD: 92.55, -0.62, -0.66%) and iShares COMEX
Gold Trust (IAU: 92.61, -0.63, -0.67%), actually hold gold bullion.
USO, though, differs even from commodity ETFs in that it doesn't own the
underlying commodity, but rather buys and sells futures. Futures are
contracts tied to where traders think a commodity will trade down the line.
Originally, futures contracts guaranteed a seller would deliver a certain
commodity in the future, such as wheat, corn, orange juice or livestock, at
a specific price. For crude, a typical seller would be an oil company, while
a typical buyer might be a refiner. In a volatile market, buyers want to
lock in a price, fearing it might be higher when the commodity is needed in
the future.
It's this difference that makes the USO tougher to gauge. And it's more
complicated than you think. (Warning: The language you're about to hear in
the following paragraphs is likely to make your head hurt. Have Tylenol on
hand, and, if you don't have the stomach for technical futures jargon, find
lighter reading, like a map of a genome.)
Futures contracts for delivery in a given month expire around the 20th of
the preceding month. To prevent an actual delivery — the typical investor
doesn't really want barrels of oil off-loaded in the driveway — traders
sell the contracts before expiration, thus closing out the transaction.
Every one of these transactions carries a commission. According to its
prospectus, USO expects to incur transaction fees of 0.35% a year. That's on
top of a 0.50% annual fee paid to management. That gives it an annual
expense rate of 0.85%, much higher than the garden-variety ETF, which
generally sport low expenses.
This need to swap contracts, closing out and buying new ones every month,
creates what's called a "roll." Frequently, there's a difference between the
trading price of the futures contract that makes delivery within the next
month and the futures contract that expires and contemplates delivery in a
later month.
There are different terms for when a later month trades above or below the
current one. Take a crude contract in May. If the June contract trades at a
price below May, this is a condition called "backwardation." Conversely, if
the June contract trades at a higher price than the one in May, this
condition is called "contango." (We warned you.)
Why do we have to throw around these big words? Because whether the crude
market is in backwardation or contango has a real impact on the rate of
return of the U.S. Oil ETF. For instance, the May 2006 future contract sold
Tuesday at $68.98 per barrel, while the June 2006 contract sold for $70.35
per barrel, a contango of $1.37 a barrel. So, with USO's initial $100
million investment, it would end May with 1.45 million contracts. But that
same amount of money would only buy 1.42 million contracts for June. Those
fewer contracts will need to experience a higher percentage gain to meet the
same total rate of return. So, there's a risk that even though the price of
oil is rising, the contango could actually create a loss for the pool.
"In an oil contango, if today's price is lower than next month's prices,
that indicates the crude oil market is well supplied and next month it will
be a little bit a tighter," says Dan Brusstar, senior director of energy
research at the New York Mercantile Exchange. "The price is now looking out
into the future. And the market expects prices to be more expensive next
month because of the supply and demand fundamentals."
One way USO hopes to offset the higher expenses and the contango risk is by
buying U.S. Treasurys. A down payment of just 5% to 10% is all that is
required to hold a futures contract. USO will take the remaining cash on
hand to purchase government bonds. In addition to guaranteeing it has the
necessary money on hand, it also pockets the yield.
None of this should necessarily scare you off the oil ETF. Despite all the
risks, commodities, especially an economically sensitive one like oil,
actually help investors diversify their portfolios. And, for those with a
bearish view of the equities market, USO provides a good hedge. Investors
anticipating higher oil prices and rising interest rates would expect these
to slow the economy, potentially causing stocks to fall. Yet, while equities
fall, USO should rise with the price of oil.
"One of the advantages of owning commodities is that they have a low
correlation to equities and bonds," says Kevin Rich, chief executive of
commodity pool operations at Deutsche Bank. "By adding a low correlative
asset to a portfolio, you lower the overall risk."
USO is the only pure oil-price play right now. The Deutsche Bank Liquid
Commodity Index Tracking Fund (DBC: 19.51, -0.36, -1.81%), an ETF, holds a
basket of commodities including but not limited to oil. There's also the
Energy Select Sector SPDR (XLE: 46.99, +0.11, +0.23%), an ETF made up of
shares of oil companies in the Standard & Poor's 500 index. But factors not
tied to the crude market, such as earnings and other issues unique to those
companies held by the fund, prevent XLE from closely following the price of
oil.
"A sector stock fund doesn't give one true exposure," says Rich. "There are
times when the underlying commodity is moving and the companies are not. It'
s a different investment. So, when you're looking for true diversity, you
want a direct relationship to the commodity." | C*********X
发帖数: 10518 | 3 你在加州还好吗？
it'
ultimate
it
【在 b********t 的大作中提到】
: Contango and Cash
: YOU HAVE TO GO back to the future if you're thinking of investing in the
: United States Oil Fund (USO: 25.60, -0.53, -2.02%).
: Since its launch Monday, there's been a lot of hype over this exchange-
: traded fund, which is billed as the first equity vehicle that allows stock
: investors to play the price of oil. But a look under the hood shows that it'
: s not that simple. In fact, it's pretty darned complicated, and its ultimate
: value will come not from where a barrel of crude trades today, but where it
: 's expected to trade over the next several months.
: First, it's important to note that USO isn't, strictly speaking, an ETF at
|
|
