WARNING: Read me before buying OOO, page-446

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SandBagger

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23/04/20

07:59

Post #: 44202177
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Originally posted by Jmorson: ↑

Ok I found an article on livewire i've copied snippets below.

OOO’s index finished rolling into the June contract on 13th April, so will not be holding negatively priced May contracts
WTI futures contracts expire on the third business day prior to the 25th of the month and therefore need to be rolled to maintain exposure. OOO’s Index gradually rolls the current contract over a five day period commencing on the fifth business day of the month.

Does this mean OOO will start rolling over on 5th business day of May? And if so will they be buying July or august futures?
If they were rolling over today, they would be selling at
June $14.15 and buying July $21. Thats a big loss.
If they were selling June $14.15 buying August $24.14. Even bigger loss.

At start of March futures were as follows (rounded)
June $44
July $45
August $47
September $47
contargo effect was significantly lower.

I guess holders hope to get a quick gain in current June futures, which could happen if opec increase production cuts or US antagonises Iran more, or trump gets back on Twitter, before having to roll over into future month holdings, or hope the gap between futures closes significantly.
contargo effect is the biggest issue atm in my opinion. If that spread between future months lessens risk is massively decreased.
Obviously all purely in my opinion.

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Given that the futures oil market knows when these ETF's are going into the market and buying 20% each on 5 known consecutive days of the next month, makes these products disadvantaged. ie this is a non thinking strategy into a sophisticated futures market.

OOO Price at posting: $19.36 Sentiment: None Disclosure: Not Held
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0 Great analysis

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