Still Own USO? Your Biggest Fear Might Come True
The energy market has been even more volatile than the stock market over the past several months, with crude oil prices seeing massive swings and even briefly going negative. Coronavirus-related disruptions and geopolitical wrangling between major oil-producing countries has put together perfect conditions for choppy markets. While many energy stocks have gotten crushed in the downdraft for crude, some investors have seen the declines as an opportunity -- and have turned to United States Oil Fund (NYSEMKT: USO) to try to profit from a possible rebound.
Unfortunately, the difficult trading environment has forced U.S. Oil Fund to change the way it tries to meet its investment objective. Even with those changes, though, USO is having trouble with its main partner in executing actual trades in the futures markets -- and it recently identified yet another risk factor that could bring about investors' biggest fear: that they won't participate in any future oil price recovery.
On its face, USO's objective seems incredibly simple: to give investors a return equal to the return from owning spot-market West Texas intermediate crude. However, the fund doesn't want to incur the expense and hassle of actually owning and storing physical crude oil, as that would eat into its returns. To avoid that, USO instead invests in oil futures contracts.
Source Fool.com
