@praetorian You’ve misquoted me. I did not say “that OOO was exposed to negative”. I said that “the Oil prices went negative and OOO was at a very real risk of being wiped out entirely”. What I said is fact, and I also agree that OOO was not exposed to the negative spot and futures oil prices in April 2020 (if it had been this fund would have been wiped out and delisted).
As I’ve stated on this thread, OOO rolls at roughly 20% per day from the 5th to the 9th of each month. When it rolls, if the then current Futures contract that OOO is invested in are negative, then OOO will be wiped out entirely. Said another way, if the April phenomenon had continued into May and still existed on May 5th thru 9th then OOO would have been wiped out entirely. It’s just math, OOO will sell at a loss and in fact owe money not in the fund and default. Rolling at the start of a month provides some protection from this because the closer you get to the monthly futures contract end date generally the higher the risk you will be taking a lower/negative price in a falling market (because if you do not roll you must take delivery and then own the physical barrel, incurring shipping/storage/insurance/interest costs).
The ‘larger’ Contango you mention was real at that time (the April OOO roll into May) and unavoidable for the OOO fund, further negatively impacting NAV at that time.
The move to a 3 month contract was wise (IMHO) and ensures OOO is lower risk and less volatile. That said, if you had held OOO for several months prior to the extreme/unprecedented April Oil events you would be disappointed with the change to a 3 month out contract as the significant near term upside potential to the lows experienced were extinguished. But for new/current holders, this fund structure change turns OOO into a more viable investment option. And thats why I chose to invest at $2.86. However, Oil has been and always will be volatile. I’m an OOO seller in the $40 - $50 spot price range.
These are only my opinions and please DYOR.
OOO Price at posting:
$19.36 Sentiment: Buy Disclosure: Held
