- Joined
- 8 June 2008
- Posts
- 12,413
- Reactions
- 18,064
Small foray at 2.53 today
OOO - Betashares Crude Oil Index ETF - Currency Hedged (Synthetic)
- Thread starter peter2
- Start date
- Joined
- 12 January 2008
- Posts
- 7,169
- Reactions
- 17,742
The world's oil producers are churning out oil far in excess of the world's needs. Demand for oil products has dropped so fast that the over supply is rapidly filling the world's storage capacity. The price of oil is falling to encourage more buyers but they're not buying because there's fewer planes flying and people are driving much less than normal.
Reducing oil production is not a simple process like turning off the pumps. There's more costs and there's a risk that the well cannot be restarted.
Oil ETFs that track the spot oil price operate using futures contracts. The price of oil ETFs fall when the price of oil falls. The ETF administrators are having difficulty ascertaining the spot oil price due to the sudden increase in price volatility. Oil futures trade almost 24hr/day while the ETFs are only open during equity market hours. This closure means there may be large gaps in price from the prior days closing price when the ETFs open for trading the next day.
The sudden increase in price volatility in all markets has exposed the disadvantages of ETFs as an investment product. This is clearly seen in the inverse ETFs that should go up by as much as their underlying benchmark when it goes down. They've been lagging further and further behind.
I notice that @qldfrog has bought some OOO at $2.53. Nicely done. I would hope that the risk is capped at 2.53 but I'm not certain of this now that we've seen negative futures prices. Can ETFs go below zero also?
Reducing oil production is not a simple process like turning off the pumps. There's more costs and there's a risk that the well cannot be restarted.
Oil ETFs that track the spot oil price operate using futures contracts. The price of oil ETFs fall when the price of oil falls. The ETF administrators are having difficulty ascertaining the spot oil price due to the sudden increase in price volatility. Oil futures trade almost 24hr/day while the ETFs are only open during equity market hours. This closure means there may be large gaps in price from the prior days closing price when the ETFs open for trading the next day.
The sudden increase in price volatility in all markets has exposed the disadvantages of ETFs as an investment product. This is clearly seen in the inverse ETFs that should go up by as much as their underlying benchmark when it goes down. They've been lagging further and further behind.
I notice that @qldfrog has bought some OOO at $2.53. Nicely done. I would hope that the risk is capped at 2.53 but I'm not certain of this now that we've seen negative futures prices. Can ETFs go below zero also?
- Joined
- 8 June 2008
- Posts
- 12,413
- Reactions
- 18,064
Just casino bet, 1k only, I think the odds are good for making money but indeed can OOO go back to 0, that is a question I have no answer,
but evenslight jitters up could allow me to sell and buy a coffee or 2 when we are free again to get out
but evenslight jitters up could allow me to sell and buy a coffee or 2 when we are free again to get out
PZ99
( ͡° ͜ʖ ͡°)
- Joined
- 13 May 2015
- Posts
- 3,303
- Reactions
- 2,402
My guess is if an ETF went below zero it would be akin to insolvent trading and should therefore be suspended from trading.. No? Otherwise they are paying me to buy their shares.
(better check my stock transfer company details are up to date)
Another guess is they could always do a consolidation to up the price.
I bought some for $2.55 also.
(better check my stock transfer company details are up to date)
Another guess is they could always do a consolidation to up the price.
I bought some for $2.55 also.
I was told by the guy who answered the phone at Betashares that no it could not go negative but that yes it could theoretically go to zero which would close the fund and investors would lose all their money. They would not halt trading on the fund.
PZ99
( ͡° ͜ʖ ͡°)
- Joined
- 13 May 2015
- Posts
- 3,303
- Reactions
- 2,402
Thanks for that. So it's a fund with no safety net or any protection whatsoever.
Instead of suspending trading pending higher prices they would rather just let you go broke.
Not healthy.
- Joined
- 6 September 2016
- Posts
- 1,260
- Reactions
- 1,596
It's an ETF with a stated purpose, not a market timing instrument. If you want to await higher prices, sell out and wait in cash or don't buy in the first place?
From what i understand, this ETF can't track the actual price of oil. What they do is sell futures they bought last month and buy into futures for the next. So if futures prices are higher than expected while spot price always crashes down due to lack of storage, then this ETF will continue bleeding til they get delisted.
PZ99
( ͡° ͜ʖ ͡°)
- Joined
- 13 May 2015
- Posts
- 3,303
- Reactions
- 2,402
O Well the futures is back up 22% at present so I might make a quick buck before it dies
Kinda ironic how in 15 years we went from invading one country for oil only to now be storing it in another country because there's too much of it.
Kinda ironic how in 15 years we went from invading one country for oil only to now be storing it in another country because there's too much of it.
- Joined
- 3 May 2019
- Posts
- 6,182
- Reactions
- 9,669
Just an observation from a knife catcher... from yesterday's plunge, the bounce back that may occur on open is possibly short lived.
Around 11:30 today, the truer direction will start to emerge in whatever direction.
Nothing stood out to me to buy yet...?
F.Rock
Around 11:30 today, the truer direction will start to emerge in whatever direction.
Nothing stood out to me to buy yet...?
F.Rock
PZ99
( ͡° ͜ʖ ͡°)
- Joined
- 13 May 2015
- Posts
- 3,303
- Reactions
- 2,402
My sell order is already queued.
Short lived just like the last one but thanks to Mr Trump for making both spikes happen
- Joined
- 6 September 2016
- Posts
- 1,260
- Reactions
- 1,596
USO is trading at a significant premium to NAV, so OOO.AX probably is as well.
What are you guys doing? Just gambling, and paying a hefty premium to get in the door of the casino.
What are you guys doing? Just gambling, and paying a hefty premium to get in the door of the casino.
PZ99
( ͡° ͜ʖ ͡°)
- Joined
- 13 May 2015
- Posts
- 3,303
- Reactions
- 2,402
Not me. I buy and sell for a profit. Discuss
- Joined
- 6 September 2016
- Posts
- 1,260
- Reactions
- 1,596
No.
PZ99
( ͡° ͜ʖ ͡°)
- Joined
- 13 May 2015
- Posts
- 3,303
- Reactions
- 2,402
Temporary change - full ann:
TEMPORARY CHANGE TO OOO’S UNDERLYING FUTURES EXPOSURE FROM ONE-MONTH TO THREE-MONTH WTI CRUDE OIL FUTURES CONTRACTS
The BetaShares Crude Oil Index ETF – Currency Hedged (synthetic) (the “Fund”) provides investment exposure to the performance of WTI crude oil futures. The Fund aims to track the performance of the S&P GSCI Crude Oil Index Excess Return (the “Index”) hedged into Australian dollars, before fees and expenses.
The Index includes the WTI crude oil futures contracts with the nearest expiration date i.e. futures contracts with one-month maturities which are rolling into the next month’s contract according to a regular cycle. The Fund’s investment exposure is obtained via a swap agreement.
Investors will be aware that the market for crude oil has recently been experiencing significant volatility. Indeed, for the first time in history, the WTI crude oil futures May 2020 contract traded at negative prices, ie below zero, intra-day on 20 April 2020.
While the Fund did not have investment exposure to the May 2020 futures contract at that time - as investment exposure had previously been rolled into the subsequent June 2020 futures contract, in accordance with the Index’s set schedule for rolling futures contracts - the front month (i.e. June 2020) futures contract has in recent days also experienced significantly higher levels of volatility.
In view of the unprecedented market developments in the last few days, and to reduce the risk to the Fund of the June 2020 futures contract trading at a negative price (which would reduce the Fund’s value to zero), BetaShares considers it prudent, and in the best interests of unit holders, to temporarily replace its investment exposure to the one-month (currently June 2020) contract with exposure to the three-month (currently September 2020) contract with immediate effect and until further notice, by arrangement with the swap provider.
While this change can be expected to temporarily result in a higher level of tracking error for Fund performance relative to the Index than would otherwise be the case (as the Index will continue to reflect the one-month contract), BetaShares considers that the longer-dated futures contract should have relatively lower volatility, and that exposure to it should reduce the risk of the Fund, and unit holders, experiencing a permanent loss of capital. Given the high level of risk in the global oil market, investors should nevertheless exercise caution.
In the current unprecedented market conditions, the significant declines in oil prices and the unusually high cost of rolling futures in near months have negatively affected Fund returns. BetaShares believes that the temporary change to longer-dated futures contracts noted above should reduce the cost of rolling futures.
BetaShares will continue to closely monitor market developments and will notify investors of any further updates to the Fund’s investment approach.
As this information does not take into account the personal circumstances of any particular investor, investors should consider consulting their financial adviser regarding this announcement.
The BetaShares Crude Oil Index ETF – Currency Hedged (synthetic) (the “Fund”) provides investment exposure to the performance of WTI crude oil futures. The Fund aims to track the performance of the S&P GSCI Crude Oil Index Excess Return (the “Index”) hedged into Australian dollars, before fees and expenses.
The Index includes the WTI crude oil futures contracts with the nearest expiration date i.e. futures contracts with one-month maturities which are rolling into the next month’s contract according to a regular cycle. The Fund’s investment exposure is obtained via a swap agreement.
Investors will be aware that the market for crude oil has recently been experiencing significant volatility. Indeed, for the first time in history, the WTI crude oil futures May 2020 contract traded at negative prices, ie below zero, intra-day on 20 April 2020.
While the Fund did not have investment exposure to the May 2020 futures contract at that time - as investment exposure had previously been rolled into the subsequent June 2020 futures contract, in accordance with the Index’s set schedule for rolling futures contracts - the front month (i.e. June 2020) futures contract has in recent days also experienced significantly higher levels of volatility.
In view of the unprecedented market developments in the last few days, and to reduce the risk to the Fund of the June 2020 futures contract trading at a negative price (which would reduce the Fund’s value to zero), BetaShares considers it prudent, and in the best interests of unit holders, to temporarily replace its investment exposure to the one-month (currently June 2020) contract with exposure to the three-month (currently September 2020) contract with immediate effect and until further notice, by arrangement with the swap provider.
While this change can be expected to temporarily result in a higher level of tracking error for Fund performance relative to the Index than would otherwise be the case (as the Index will continue to reflect the one-month contract), BetaShares considers that the longer-dated futures contract should have relatively lower volatility, and that exposure to it should reduce the risk of the Fund, and unit holders, experiencing a permanent loss of capital. Given the high level of risk in the global oil market, investors should nevertheless exercise caution.
In the current unprecedented market conditions, the significant declines in oil prices and the unusually high cost of rolling futures in near months have negatively affected Fund returns. BetaShares believes that the temporary change to longer-dated futures contracts noted above should reduce the cost of rolling futures.
BetaShares will continue to closely monitor market developments and will notify investors of any further updates to the Fund’s investment approach.
As this information does not take into account the personal circumstances of any particular investor, investors should consider consulting their financial adviser regarding this announcement.
- Joined
- 3 May 2019
- Posts
- 6,182
- Reactions
- 9,669
So they are obviously fairly worried about the fund hitting 0.
Have no idea about futures, but what's the great benefit of the 3 month contract ?
A side thought is, how many barrels got sold at negative prices?
Big volume or 5000 barrels?
Have no idea about futures, but what's the great benefit of the 3 month contract ?
A side thought is, how many barrels got sold at negative prices?
Big volume or 5000 barrels?
From a newbie knife catcher that is at the hospital getting stitches please let me know when something stands out for you to buy
