Latest news with #UnitedStatesOilFund
Yahoo
05-07-2025
- Business
- Yahoo
USOY Is an Income Juggernaut
The Defiance Oil Enhance Options Income ETF offers a monster yield. The fund distributes income to its investors each week. Its overall performance hasn't been positive since its inception last year. 10 stocks we like better than Tidal Trust II - Defiance Oil Enhanced Options Income ETF › The Defiance Oil Enhanced Options Income ETF (NASDAQ: USOY) is an alluring income-focused investment opportunity. The exchange-traded fund's (ETF) implied annualized distribution rate is an eye-popping 111%. It distributes income to fund investors on a weekly basis. That combination of yield and payment frequency makes it appear to be an income juggernaut. However, and you probably know this is coming, there is a big catch: The fund has a very high-risk profile. Here's a closer look at this ETF, which aims to provide investors with an enhanced oil-fueled income stream. USOY is an actively managed ETF that aims to provide investors with an oil-backed income stream through options. The fund's strategy is to sell put options on the popular oil ETF, the United States Oil Fund (NYSEMKT: USO). The United States Oil Fund is an exchange-traded security designed to track the daily price movements of crude oil delivered to Cushing, Oklahoma (the country's main oil trading hub). USO does that by investing in oil futures contracts and over-the-counter swaps (customized contracts between two parties, such as financial institutions and corporations). The United States Oil Fund doesn't own physical oil, nor does it take delivery of physical barrels at Cushing. It invests in futures contracts and swaps that it sells before expiration. It rolls the proceeds into new contracts that typically expire in less than two months. USO's primary holding is currently 15,081 U.S. crude oil futures contracts that expire in August. The Defiance Oil Enhanced Options Income ETF writes (shorts) put options on USO that are either at the money (right at the current price of the underlying security) or in the money (below the current market price). This strategy aims to generate income and provide exposure to the price of USO. The ETF sells put options on USO at least once a week. Selling put options generates income if USO's share price increases above the current price, stays flat, or decreases slightly (as long as the decline is less than the value of the options premium received). The fund distributes the income it earns to investors each week. Writing put options can be a very lucrative income strategy. Options writers receive the premium (the value of the option) up front. They retain all or part of the premium, depending on the price of the underlying security at expiration. The Defiance Oil Enhance Options Income ETF's distribution payment for the last week of June was $0.1999 per share. If we annualized that rate, the fund would distribute $10.39 per share of income to investors over the course of a year. That's a 111% yield on the ETF's recent price in the low-$9.00-per-share range. As big as that payout seems, it's down from prior payment levels. The fund, which had only recently started making weekly income distributions, had previously paid investors monthly. Those payments had been as high as $1.2365 per share ($14.84 annualized). As the chart shows, the fund's income payments (and the value of the fund's share price) have been steadily declining since its launch last year: The decline in the fund's value is worth noting. When we add the income paid to the share price, the total return has actually been negative 0.93% since the fund's inception in May 2024. That's due to two issues. First, the fund has a high expense ratio of 1.22%. The costs of actively writing put options on USO are eating into the returns generated by the fund. The other issue is that USO's strategy aims to track the daily price movements of oil. While it does a solid job of tracking oil over the short term, it's abysmal at following crude prices over the longer term. That's due to the costs of rolling futures contracts. Since the fund's inception a decade ago, the value of WTI crude has risen by nearly 20%, while the fund's value has declined by more than 50%. The cost of writing put options on a security that steadily loses value hasn't been a winning strategy for the Defiance Oil Enhanced Options Income ETF. The Defiance Oil Enhanced Options Income ETF seeks to deliver a high-yielding income stream generated by writing put options on a crude oil ETF. While the fund's weekly distributions are high relative to its share price, that price has been steadily declining. That value erosion (due in part to its high expense ratio) has more than offset all the income generated by the fund since its inception. While the fund may perform better in the future, especially if oil prices are volatile to the upside, it's a very high-risk fund that's not suitable for investors seeking a bankable passive income stream. Before you buy stock in Tidal Trust II - Defiance Oil Enhanced Options Income ETF, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Tidal Trust II - Defiance Oil Enhanced Options Income ETF wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $699,558!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $976,677!* Now, it's worth noting Stock Advisor's total average return is 1,060% — a market-crushing outperformance compared to 180% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of June 30, 2025 Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. USOY Is an Income Juggernaut was originally published by The Motley Fool
CNBC
24-06-2025
- Business
- CNBC
Oil's wild moves created historic trading in this ETF, and a warning for retail investors
The constant stream of headlines out of the Persian Gulf has led to a highly volatile oil market and a steep pullback in a fund that has burned investors plenty of times before. One of the most direct ways for regular investors to play in the oil market is the United States Oil Fund (USO) , which holds oil futures contracts and over the counter swaps. The fund is designed to mirror the changes in the near-term futures market. USO, which was created in 2006, has about $1.3 billion in assets under management. On Monday, when the fund dropped 8%, more than 50.6 million shares of USO changed hands, according to FactSet. That is highest daily share volume since 2020 and, according to Strategas ETF strategist Todd Sohn, the highest daily notional value traded for the fund ever. USO 1M mountain The United States Oil Fund (USO) has seen big moves in both directions over the past month. USO fell again on Tuesday and has now given back all of its gains since June 12, the day before Israel launched airstrikes on Iran . That type of quick reversal is not unusual in the oil market, and it is a microcosm of the risk in treating the fund as a long-term investment. "Oil ETFs are a good trading tool, but not an investment. The United State Oil Fund (USO) traded a record amount of notional volume yesterday, yet the fund has annualized at -9.7% since inception. … It's hard to find many ETFs outside of the Vol spectrum with similar returns. We'd focus on playing Oil through broader Commodity or Managed Futures ETFs," Sohn said in a note to clients. The good news for investors who may have dabbled and lost in the USO over the past few weeks is that the rest of their portfolio is probably doing just fine. The equity market appears to have shrugged off concerns of a long-term conflict with Iran, and the S & P 500 is within striking distance of a record high .
Yahoo
13-06-2025
- Business
- Yahoo
Oil ETFs Jump on Escalation in Middle East Tensions
Oil prices skyrocketed more than 12% on June 13, following a major military escalation in the Middle East. Brent crude jumped above $78 per barrel, while WTI crude rose to nearly $77 — the highest level in four months. With this rally, oil is on course for its largest weekly gain since 2022. The impressive jump in oil prices has a big impact on oil ETFs, helping these to gain as well. United States Oil Fund USO, United States Brent Oil Fund BNO, Invesco DB Oil Fund DBO, Invesco DB Energy Fund DBE and United States 12 Month Oil Fund USL are popular oil ETFs that could be interesting plays to directly deal with in the futures market. Israel launched a series of airstrikes on Iran's nuclear and ballistic missile facilities, targeting key infrastructure and military leaders. The move heightened geopolitical tensions and triggered a wave of risk-off sentiment across global markets. Iran is preparing to retaliate, raising concerns about disruptions and contagion in neighboring oil-producing nations (read: Oil ETFs Surge on Iran Tensions: Can the Rally Last?).The situation has raised concerns about potential supply disruptions from the oil-rich region, especially via the Strait of Hormuz, which transports around one-third of the world's seaborne oil. Analysts warned that disruption of up to 20 million barrels per day in extreme retaliation could be at warn that if the conflict drags on or draws in other regional powers, crude prices could breach the $100 mark. United States Oil Fund (USO) United States Oil Fund is the most popular ETF in the oil space, with an AUM of $916.5 million and an average daily volume of 5 million shares. It seeks an average daily percentage change in USO's net asset value for any period of 30 successive valuation days within plus/minus 10% of the average daily percentage change in the price of the Benchmark Oil Futures Contract over the same period. United States Oil Fund has an expense ratio of 0.70%.United States Brent Oil Fund (BNO)United States Brent Oil Fund provides direct exposure to the spot price of Brent crude oil, as measured by the daily changes in the price of BNO's Benchmark Oil Futures Contract. The Contract is the futures contract on Brent crude oil as traded on the ICE Futures Exchange, which is the near-month contract to expire. If the near-month contract is within two weeks of expiration, the Benchmark will be the next month's contract to expire. United States Brent Oil Fund has amassed $87.5 million in its asset base and charges 94% as annual fees and expenses. Volume is good as it exchanges 639,000 shares a day on average. Invesco DB Oil Fund (DBO)Invesco DB Oil Fund provides exposure to crude oil through WTI futures contracts and follows the DBIQ Optimum Yield Crude Oil Index Excess Return. The Index is a rules-based index composed of futures contracts on WTI. Invesco DB Oil Fund has an AUM of $209.1 million and charges 75 bps of annual fees. DBO trades in an average daily volume of 263,000 shares. Invesco DB Energy Fund (DBE)Invesco DB Energy seeks to track changes in the level of the DBIQ Optimum Yield Energy Index Excess Return plus the interest income. The benchmark is a rules-based index composed of futures contracts on some of the most heavily traded energy commodities in the world — light sweet crude oil (WTI), heating oil, Brent crude oil, RBOB gasoline and natural gas. Invesco DB Energy has AUM of $48.6 million and trades in an average daily volume of 22,000 shares. It charges 77 bps in annual fees (read: Oil Prices Rebound: Can the ETF Rally Last?).United States 12 Month Oil Fund (USL) United States 12 Month Oil Fund provides investors with exposure to the daily price movements of West Texas Intermediate's light, sweet crude oil. USL's benchmark is the near-month futures contract to expire and the contracts for the following 11 months for a total of 12 consecutive months. If the near-month futures contract is within two weeks of expiration, the benchmark will be the next-month contract to expire and the contracts for the following 11 months. United States 12 Month Oil Fund is unpopular and less liquid, with an AUM of $40.3 million and an expense ratio of 0.79%. USL trades in an average daily volume of 6,000 shares. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report United States Oil ETF (USO): ETF Research Reports Invesco DB Oil ETF (DBO): ETF Research Reports United States Brent Oil ETF (BNO): ETF Research Reports Invesco DB Energy ETF (DBE): ETF Research Reports This article originally published on Zacks Investment Research ( Zacks Investment Research Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
21-05-2025
- Business
- Yahoo
How to invest in oil
Oil is a basic necessity of modern life, and it's among the most strategic commodities. So it's not surprising that oil is a popular investment, and while green energy has become a growing force recently, modern economies will need oil for a long time, putting a floor under its price. So oil offers the kind of safe-haven potential that investors in gold like, and it also provides a means to hedge an investment portfolio, too. By investing in oil, advanced investors can offset a rising oil price on the rest of their portfolio, protecting against the often-volatile pricing of this key input. Here are five different ways to invest in oil, from direct ways to the more indirect. One of the easiest ways to invest in oil is via an oil exchange-traded fund (ETF). An oil ETF owns futures and options contracts on crude oil, rather than the commodity itself — unlike some gold ETFs that own the actual physical metal. As the spot price of oil fluctuates, the price of the ETF will tend to mimic these changes, though imperfectly due to how the fund invests in oil. So if you think the price of oil will rise and don't want the hassle of managing futures and other contracts yourself, an oil ETF may be the way to go. Of course, by betting on the price of oil with a fund, you have only one way to win: if the price of crude rises. While that's been a good bet over the long term, this kind of ETF may be better as a trading vehicle than a buy-and-hold investment. Three of the largest ETFs include: United States Oil Fund (USO) Invesco DB Oil Fund (DBO) ProShares K-1 Free Crude Oil Strategy ETF (OILK) Risks: The price of oil can be volatile, which is perhaps the most obvious risk of investing in oil. Given this historic volatility, an oil ETF may be a better pick if you're looking to trade the market over a shorter time frame — say, when the economy is on the upswing. And since oil funds don't own oil directly, their performance may not track the price of oil all that well. Looking to take oil trading into your own hands? You can invest in oil derivatives called futures, essentially doing for yourself what the oil ETFs charge you for. Futures are the most popular way to trade commodities such as oil, gold, corn, wheat and a range of other agricultural goods. With futures contracts, you agree to purchase oil at some specified price in the future, and you need to put up only a portion of the contract's value now. Because of this structure, futures let traders buy much more than they would otherwise be able to, and if things go well, they can earn a lot of money. But they can lose it just as quickly if the commodity's price moves the wrong way. You'll need to work with a broker that offers futures trading, which typically requires a higher account minimum than a traditional stock brokerage account. Risks: Because of the leverage involved in futures and the volatile nature of oil, you can win and lose quickly. If oil moves against you, you'll need to put more cash to hold your futures position or otherwise have it closed out — perhaps just when it's lowest. Futures are for experienced traders, and only some of the top brokers offer the ability to trade futures contracts. Another way to invest in oil is to own the businesses that produce it, and oil exploration and production (E&P) companies can offer you multiple ways to win when oil rises. This path may be the best option for investors, because they can profit when oil rises but also when the company increases oil production, so they're not just stuck relying on the oil price alone. In addition, as the price of oil increases, each barrel that's produced becomes incrementally more profitable for the oil company. So its profits can rise faster than the price of oil itself. Risks: Investing in individual stocks requires a lot of time and energy, and you can't just throw a dart and expect to be successful here. You'll need to invest in a well-positioned company if you want to increase your odds of success and stick with a proven player, not a company that's in the development stage or still looking for its first well. And of course, individual stocks can be every bit as volatile as the price of oil, so you can still be in for a bumpy ride. If you don't want to invest in individual oil stocks, then you can purchase an ETF that holds oil companies. You'll still get exposure to oil but in a more diversified way that reduces your risk. The fund may hold dozens of oil stocks, reducing your reliance on any one of them too much. Three of the largest funds include: Energy Select Sector SPDR Fund (XLE) Vanguard Energy ETF (VDE) SPDR S&P Oil & Gas Exploration & Production ETF (XOP) They all feature low expense ratios — just 0.09 percent, 0.09 percent and 0.35 percent, respectively — so you won't end up paying a lot to own the fund and for the advantages of diversification. Risks: A fund's diversification can protect you against the issues plaguing a specific company, but it won't protect you if something affects the entire industry, such as a sustained decline in the price of oil. You'll want to carefully look at what's included in your fund and whether you're getting the kind of investing exposure you want, because ETFs may have non-oil companies in them. Oil stock mutual funds offer another avenue to invest in a diversified collection of oil companies that reduces your risk but still gives you upside if the price of oil moves higher. Two of the largest funds here include the Vanguard Energy Fund (VGENX), with an expense ratio of 0.44 percent, and Fidelity Select Energy Portfolio (FSENX), with an expense ratio of 0.65 percent. These funds have heavy exposure to oil producers but also contain other businesses that have less upside if oil rises, as well as other related companies like coal or solar producers. Risks: Like oil ETFs, a mutual fund's diversification protects you against the challenges individual companies face but not against something that affects the industry as a whole, such as falling oil prices. Also like ETFs, mutual funds may contain many companies that don't give you the exposure to oil prices that you want, so it's important to look at the fund's holdings. Oil offers a lot of positive qualities that can make it an attractive investment. Strategically important commodity: Oil is a strategic commodity, and while other competing energy sources are coming on line, it will remain vital for the foreseeable future. Strong demand: The variety of uses for oil and its derivative products means that demand will remain high and will help keep a floor under the commodity's price. Long-term rising price: Closely related to strong demand, the price of oil has increased over the long term, making it attractive to continue drilling and producing oil. Volatility: Volatility is an attractive quality for traders looking to make money on the short-term swings in the price of oil. Defensive store of value: Given the strong demand for and strategic necessity of oil, the commodity can act as a store of value over longer periods. Hedge against other investments: Many companies rely to some degree on affordable oil, so when oil rises, they can get hit. An investment in oil can be used as a hedge against increasing oil prices in the rest of your portfolio, helping reduce the risk of rising oil. Other commodities like gold and silver have proven to be trading alternatives to oil. Investors have a variety of ways to play the price of oil depending on exactly the kind of upside and downside they want. Investing in an oil fund or oil futures may offer plenty of attractive volatility for traders, while individual oil stocks may offer more long-term upside for investors. Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation. Sign in to access your portfolio
Yahoo
09-04-2025
- Business
- Yahoo
Investors Cash Out of Oil Bear Fund at Rapid Pace
(Bloomberg) -- An exchange-traded product tied to declines in the oil market just saw its biggest outflow of funds since 2020. With crude prices crashing to a four-year low, some investors pulled out of the fund to cash in on profits. Oil has been hit by the one-two punch of OPEC+ choosing to ramp up output hours after US President Donald Trump last week unveiled a spate of trade policies that were especially punishing to major crude-importing economies, including China and India. Futures in New York have slumped for four straight days and are trading near the lowest levels since 2021. Some investors are growing wary over how much further prices will fall and have chosen to cash in on their bearish bets. The ProShares UltraShort Bloomberg Crude Oil ETF, an exchange-traded product that seeks to return twice the inverse of the daily performance of its underlying index, saw an outflow of $72.2 million on Monday, according to fresh data. That's the biggest net-withdrawal since markets cratered at the beginning of the Covid pandemic. Meanwhile, inflows for the United States Oil Fund, the largest ETF tracking the price of oil, surged on Friday by $275 million to the highest levels since 2020. It posted an outflow of $98.7 million in the following session. Recent dramatic price moves have lured investors of all stripes back to the crude market after an extended period of depressed trading. Crude markets saw an $11.6 billion net inflow in the week ending April 4, JPMorgan Chase & Co. analyst Tracey Allen wrote in a note to clients. Open interest across the WTI futures curve has also surged in recent sessions to the highest in over three months. In ETF trading, individual investors have made it a habit to leverage economic downturns to skim profits off of security basksets that can be bought and sold via amateur-friendly single trades. A massive influx of these so-called oil tourists contributed to briefly pushing US crude into negative territory at the onset of the global pandemic. Just recently, as escalating tensions in the Middle East threatened to curtail global flows, retail traders poured money into the USO fund. Though opportunistic investors have traditionally gone for equities, the popularity of commodity-linked products has increased over recent times as retail brokers like Robinhood make it easier to place trades, according to Christina Qi, chief executive officer of Databento. While that's helped to reinforce liquidity, it's also a portent of choppy trading. One measure of volatility jumped this week to the highest level since November. 'Retail-driven flows can increase headline liquidity but also amplify short-term risk, particularly in fast-moving macroeconomic environments,' Qi said. 'If the mood of the market suddenly changes, that money can dry up super quickly and increase risk.' (Corrects name of fund in third paragraph.) More stories like this are available on ©2025 Bloomberg L.P. Sign in to access your portfolio
