OOO (ASX) WARNING: Read me before buying OOO

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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Exactly, it doesn't really matter if the price of oil goes up today or tomorrow, what matters is the difference between this month and the next month. So long as there is a big price differential between the spot price and the futures prices this will continue to lose money hand over fist.

To make money on this thing, we would actually need the spot price to be higher than the futures prices.

OR

You would need the effect of contango to decrease from it's widest point, ie move towards backwardation and the price of the instrument (OOO) to reflect this fairly.

As it stands right now, this thing is pricing in massive losses on the future roll over, so even thought the price went up last night, it needs to move up substantially towards next months price. A small spot price increase isn't going to make you money on this thing, it needs to rise towards the futures price for next month towards the end of the rollover date.

In a nutshell this ETF does not do what everyone expects it t do, and quite frankly I believe this instrument and the USO instrument have been marketed in a misleading nature to retail punters.

All OOO does is let you speculate on the difference in price between one futures contract and another. It says nothing about the long term price of oil and nothing about today's price. This is essentially a rolling betting contract. You really need to be long or short another product combined with this to make it a useful tool.