Friday, June 12, 2009

Which Crude Oil ETF/ETN? DXO, USO or USF?

Now that crude oil is soaring, many are itching to get a hand into one of the ETFs.

However, the are differences between ETF and ETN. And if I remember correctly, the following article was highlighted by blogger
Seng before, Potential Dangers of Investing in Exchange Traded Notes (ETN's).

  • There is One Gigantic Difference … An ETN Is Really a Bond!
    That's why they're called “notes” rather than “funds.” Yet it usually doesn't pay interest at a fixed rate, like say a Treasury bond would. Instead your “interest” is the return on a designated index.

Now the ticker symbol DXO is an ETN. And it's full name is PowerShares DB Crude Oil Dble Long ETN.

Now assuming IF you are feeling bullish on crude oil when the crude oil was below US40 per barrel.

Remember how one suggested that being long in oil was much better than buying kijang coins? (
Did I Regret Not Buying Kijang Coins Back In December? )
Anyway, let's look at the performance of DXO.

Impressive eh?

Now let's see the performance of USL



And here is USO.



Now here is an article that must be read also from Jesse.
Is the USO Oil Fund "Like a Pyramid Scheme?"

12 comments:

random said...

wah why so ngam? i also looking at USO.. don buy double long etfs as the risk is double (hence the double in the name)

but also have to remember that you are buying in USD so USD dropping will mitigate yr gain (if any)

now let me read the article first

random said...

hmm.. interesting..

another safer bet would be exposure in oil giants per se..

any thoughts?

Moolah said...

You did not remember dXo been been mentioned b4?

Risk not quite the same... now.

You really need to be spot on now.

random said...

yeah so look see look see only :)

Moolah said...

Well the main thing is what's your outlook for crude oil?

Do you really think that the commodity will inflate back to above 100?

At around 70+, it's neither really here or there.

random said...

dunno about the short term, but peak oil is very real

Moolah said...

Knowing and understanding what the peak oil theory is suggesting is one issue, making money is another.

;)

random said...

true..

so got tipsy or not?

;)

Moolah said...

Here's another article..

http://kirklindstrom.blogspot.com/2009/06/oil-etf-dissapoints-oil-investors-wtic.html

The Wanderer said...

Random,

IMHO, USD is not a problem if you are using leveraged product. Making a profit out of it is a major concern.

For me, my account is in AUD but my trade can be in GBP, USD, Euro etc.

Once the trade is closed, the profit or loss can be converted or remain in other currencies.

So the exposure to forex risk is minimal.

That's why i trade CFD rather than ETF.

On the other hand, CFD is highly leveraged, so managing position size is very very important.

The Wanderer said...

Moola,

A mirror is a mirror.

It can not be an exact replicate.

Some mirrors make us look a bit thinner, some a lot fatter.

Some look like exactly like ourselves, but still it is not the self that is standing in front of the mirror.

Moolah said...

T&T,

That blog link merely represented another blogger's view points.

I highlighted it because it EXISTED.

Despite that blog's comments, on my blog posting, one could see the chart performance of USL and USO is NOT bad - in fact it's impressive since March 2009.

If anything, I would heed more to Jesse's comments on USO.