Two New Exchange Traded Funds Allow Unique Oil Investment Strategies
Keywords: Exchange Traded Funds, ETF, Oil Markets, Energy Markets
Investors can now track the price of oil futures without buying oil futures through a new Exchange Traded Fund. (UCR), operated by Claymore Securities. The thing that makes this unique is that the ETF does not invest in the futures either. “We’re not buying oil, but because we issue shares in pairs we can generate returns by pledging assets between the matching funds,” said Greg Drake, managing director at Claymore Securities, in an interview.
In other words, promising assets between the pair alters the ETFs’ share prices to synthetically reflect oil’s movement. This makes it a lot easier for investors who would normally not go anywhere the futures market to get exposure to oil prices in their portfolio.
Think oil prices are going to drop? Well Claymore has you covered there too. Claymore also operates a fund (DCR) that is designed to provide positive returns to investors when the price of oil is falling. Using these two funds, investors have a number of ways to invest in oil prices and devise their own hedging strategies.
The fund trades in MacroShares. The MacroShares have a maturity of 20 years from the original offering date, but as with all ETFs investors can sell their shares throughout the trading day. If the shares move 85% away from their initial prices in either direction for three straight trading days, a termination is triggered. The shares then would distribute all assets back to shareholders at the end of the quarter, and Claymore would issue a new pair.
Therefore, investors in the Claymore MacroShares could lose most or all of their initial investment if oil prices move dramatically against them. How likely is this? If the initial shares were offered at $60 a barrel, that means oil prices over a period of 3 days would have to move about $51 up or down away the $60 buying price. Yes it is possible, but very unlikely.
How Are these Shares Different From Their Competitors?
The Claymore MacroShares are structured very differently from other oil-linked ETFs on the market such as U.S. Oil Trust (USO) which invests in oil futures and “rolls” the contracts to maintain exposure.
Barclays Global Investors manages an “exchange-traded note” called iPath Goldman Sachs Crude Oil Total Return ETN (OIL).
PowerShares Dynamic Oil & Gas Services Portfolio (PXJ) invests in shares of publicly traded energy companies.
Commodity ETFs that use futures, such as U.S. Oil Trust, can produce either positive or negative “roll return” based on the relationship between spot prices and longer-dated futures contracts. Any capital gains are passed to investors and are taxed as 60% long-term gains and 40% short-term gains.
Sometimes, futures prices are lower than the spot price for a commodity, a condition known as “backwardation.” In the opposite situation, called “contango,” investors experience a negative roll yield because futures prices are higher than spot prices.
Claymore said its MacroShares won’t experience either situation because they synthetically provide exposure to oil prices by pledging assets, and don’t use futures.
So investors can invest in Claymore MacroShares by themselves or use Claymore with one of the other funds to create a hedge.
The options for investors are becoming greater and greater but the complexities are also increasing. Investors should become familiar with the vehicle they are investing in before money is committed. As ETFs move more and more into the commodity based areas, investors will have investment options never open to the middle of the road investor before.
Andrew Goldman is president of Metal Rabbit media services, the operator of www.exchangetradedfundinvesting.com. Andrew has contributed articles on finance and environment to severla publications over the last ten years.
Previous Articles Highlighter:
A Unique Precious Metals Exchange Traded Fund Is Launched Under A Cloud Of Worry (1)
This is more broad based for investors and is based on equities in the industry not commodity prices. The new ETF may present more opportunities to benefit from volatility, as mining-related shares tend to move more dramatically than overall bullion.
Using ETFs To Invest In A Good Performing Commodity Sector You May Have Missed (2)
There is a commodity that investors may not be aware of that is posting good returns. That commodity is water There is a growing world demand for clean water worldwide.
Home Sales Continue To Drop In Southern California (3)
Andrew Goldman is president of Metal Rabbit media services, the operator of www.Exchangetradedfundinvesting.com. He has written a number of articles on finance and investment over the last ten years.
One Of The Most Popular Exchange Traded Funds Will Soon Have Solid Competition (4)
Over this period the QQQQ has shed about 10% a year, while during the same period of time the ArcaEx Tech 100 index has only shed about 2.4% a year.
Article Marketing: Why You Must Brand Your Name (5)
That is branding's main purpose, and it has a lot to do with the name you choose for your product. 2. Branding can relay your product's performance. Over time, your product will gain in popularity.
How To Build A Large List As An Affiliate Marketer (6)
It does not matter how many subscribers you can acquire, the key to a successful opt-in list is keeping them. The relationship you build with your subscribers will ultimately determine your success.
How To Select The Perfect Affiliate Program (7)
The longer they last the better. You could also try cloaking your URL so your affiliate id is hidden. 5. Payment on succeeding sales. Be aware that some merchants do not pay you when the visitors click on your affiliate link that goes directly to the merchant site.
How To Grow Your List With Article Marketing (8)
You may believe that these things are a misuse of time, but it will give you an edge to your fellow article marketers considering you can deliver new and brilliant ideas.
2007 Jaguar XK-R Review (9)
The light, all-aluminum, body structure is what gives this jewel both its agility and a high standard of safety; this feature ensures a shorter acceleration time, a more precise handling, less fuel consumption and a higher degree of resistance in case of impact.
Buy Florida Lots For Maximum Appreciation (10)
Recently, the internet has also come up as a major source of information for this purpose. You will find that there are many websites on the internet that give you detailed information of vacant lots in a particular area, ideal for investment purposes.
Newer Articles Highlighter:
Build Your Credit While Still In School (1)
If you get one, go ahead and use it just a little. Not so much that you can't pay it off. Get a job if you have to.
Johnny Bravo Cartoon Characters (2)
Quite often, Carl manages to get the girl by simply speaking out the truth and showing his personality, a fact which drives Johnny Bravo the hunk completely crazy. Pops - the owner of Pops Soda is a good friend of Johnny's, always being there for him with advice and help.
Do I Really Need An Opt-In Contact List? (3)
2) Have affiliations with other companies that have at least a semblance or relation to what your site is about. Here other companies will provide links and brief descriptions of what they offer, products and services.
Fishing Charter Top Tips (4)
2. The length of time required in each charter trip. Most captains are enticed to do a little fishing before going back to the dock. This will not pose a problem at all but if it will cost the person, who requested the service, additional charges for extra minutes or hours spent beyond the agreed number of hours, then, that is a problem.
Distance Learning High School Online Programs: The Answer To Your Needs? (5)
Keywords: distance learning high school In present times, students have been spoiled for choice, for the number of distance learning high school online programs keeps growing everyday. Practically every school and college in the world is wiring itself to the IT network and is ready to provide its courses to interested students at their own pace and on their own time.
A Brief Introduction To Distance Learning (6)
This, in brief, has been an introduction to distance learning. With the latest technologies and tools the world has indeed become a smaller place, and the impact of the IT boom is reverberating in the distance education sector.
Bridge The Financial Gap With A Distance Learning Education Loan (7)
Jim Zorn is web master of the Guide to Distance Learning. Please visit to learn more about online colleges and universities, distance learning degrees, majors and courses offered as well as distance learning technology.
Survival Of The Fittest: Marketing Strategies And Distance Learning (8)
Jim Zorn is web master of the Guide to Distance Learning. Please visit to learn more about online colleges and universities, distance learning degrees, majors and courses offered as well as distance learning technology.
Looking Towards Tomorrow: Future Trends In Distance Learning (9)
Today a large number of executives are taking part in tertiary education through the means of e-courses and distance learning. Infact, research indicates that by 2010, 50% of all college students will be adults, and that in America alone, more than a 100 million people will be taking part in adult education programs.
Working Towards Positions Of Leadership In Nursing - Distance Learning Doctoral Nursing Programs (10)
Keywords: Distance Learning Doctoral Nursing Distance Learning PhD nursing programs are designed to prepare nurses to serve the community in innovative ways. The courses aim at expanding and broadening the scope of nursing and rehabilitation services in traditional areas of practice and advancing the research base.
Permalink to Two New Exchange Traded Funds Allow Unique Oil Investment Strategies