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USO, The U.S. Oil ETF Is The Culprit Behind Oil’s Massive Plunge
Posted on 4/20/20 at 5:49 pm
Posted on 4/20/20 at 5:49 pm
quote:
The U.S. Oil ETF, USO, Is The Culprit Behind Oil’s Massive Plunge
by Jim Collins
Apr 20, 2020
...The culprit here is obvious. The United States Oil ETF, USO.
According to Bloomberg, USO owned 25% of the outstanding volume of May WTI oil futures contracts as of last week. With that contract set to expire Tuesday, the buyers of that “paper oil” have to sell or take physical delivery at the end of May. ETFs like USO are not created to take physical delivery of the oil contracts they hold, so in a long squeeze, the fund’s managers . . . have to dump oil.
LINK
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Posted on 4/20/20 at 5:54 pm to NC_Tigah
I think cwill warned us not to frick around with USO, the dumbasses on WallStreetBets have fast thumbs and access to Robinhood though, they got BTFO today for sure
Posted on 4/20/20 at 5:55 pm to NC_Tigah
2 things:
Why wouldn’t this have caused a significant decline for USO today with continued selling at decreasing prices?
Presumably they had/have to replace those contracts with June and July expirations, so would that explain some support for those months expirations today or indicate coming increases for those contracts as they now look to restock their portfolio of oil futures?
Why wouldn’t this have caused a significant decline for USO today with continued selling at decreasing prices?
Presumably they had/have to replace those contracts with June and July expirations, so would that explain some support for those months expirations today or indicate coming increases for those contracts as they now look to restock their portfolio of oil futures?
Posted on 4/20/20 at 5:55 pm to NC_Tigah
quote:ouch
USO owned 25% of the outstanding volume of May WTI oil futures contracts as of last week.
Posted on 4/20/20 at 6:59 pm to DabosDynasty
I don’t think volumes were that high today.
Posted on 4/20/20 at 9:11 pm to castorinho
They be like
Posted on 4/21/20 at 4:26 am to NC_Tigah
USO may cease to exist soon. June contracts rapidly approaching zero, and July will follow if these dumbass governors don’t get their heads out of their asses.
Posted on 4/21/20 at 4:39 am to NC_Tigah
(no message)
This post was edited on 11/8/20 at 4:28 am
Posted on 4/21/20 at 5:22 am to Kraut Dawg
These situations usually point to a reverse split, and googling it seems that was the case here.
You now have only 16 shares after a 1:25 split.
Each share is worth about $22 (as of now), sooo, your investment is worth about tree fiddy.
At least you didn’t lose all $500
You now have only 16 shares after a 1:25 split.
Each share is worth about $22 (as of now), sooo, your investment is worth about tree fiddy.
At least you didn’t lose all $500
Posted on 4/21/20 at 6:29 am to TigerDeBaiter
Retail investors panic selling today is going to be a disaster for the front of the crude curve
Posted on 4/21/20 at 7:38 am to NC_Tigah
quote:
ETFs like USO are not created to take physical delivery of the oil contracts they hold
What if they just refused?
And why is it not cheaper to let it expire and refuse delivery rather than sell the contract at a negative price?
Posted on 4/21/20 at 7:49 am to NC_Tigah
I'm not buying that USO is the "culprit." It played a role, but USO is not the reason there is nowhere to store oil. If there was a way to profitably trade oil in May then someone would have bought those contracts from USO at a fair price.
Posted on 4/21/20 at 8:11 am to xXLSUXx
quote:
And why is it not cheaper to let it expire and refuse delivery rather than sell the contract at a negative price?
Pretty sure you’d be liable for the cost to transport and store somewhere. And that bill ain’t going to be cheap. Plus you’ll never trade again.
Posted on 4/21/20 at 8:16 am to xXLSUXx
quote:
and refuse delivery
really? Future Contract
Posted on 4/21/20 at 8:21 am to xXLSUXx
quote:
And why is it not cheaper to let it expire and refuse delivery rather than sell the contract at a negative price?
LOL wtf? Uhh, because it's a contract. Why do you think producers are paying people to take their oil? You can't not accept delivery. They need it gone and are paying you to do it.
Posted on 4/21/20 at 9:04 am to xXLSUXx
quote:
What if they just refused?
And why is it not cheaper to let it expire and refuse delivery rather than sell the contract at a negative price?
It's not an option. It's a contract to purchase. If you don't fulfill that contract, there, I imagine, are all sorts of penalties and costs that exceed the cost they incurred today to dump the contracts.
Posted on 4/21/20 at 9:14 am to NC_Tigah
I've made money on USO calls as recently as yesterday.
I've also made money on USO puts.
There is always money to be made
I've also made money on USO puts.
There is always money to be made
Posted on 4/21/20 at 9:15 am to LSUFanHouston
quote:
If you don't fulfill that contract, there, I imagine, are all sorts of penalties and costs that exceed the cost they incurred today to dump the contracts.
Thank you for at least being civil - but yes, that's what I was asking. What are the ramifications for not fulfilling the contract? Are there real life examples or precedents?
i.e. For certain commodities such as cattle or minerals you can choose not to transport goods after purchase, but you would incur warehouse/storage fees. Just wondering how that works with WTI as storage seems to be the issue.
This post was edited on 4/21/20 at 9:22 am
Posted on 4/21/20 at 4:47 pm to Thib-a-doe Tiger
quote:Interesting.
I've made money on USO calls as recently as yesterday.
That is a fairly complicated trade.
Why not deal in Oil Futures directly?
Posted on 4/22/20 at 9:13 am to NC_Tigah
quote:
Interesting.
That is a fairly complicated trade.
Why not deal in Oil Futures directly?
Calls aren't complicated at all. I waited until USO was under $4, then bought end of July $4 calls cheap, and dumped them the same day.
ETA: I've also lost money both in USO stock and options as well. I was just pointing out that you can make money no matter which way a security is moving
This post was edited on 4/22/20 at 9:15 am
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