Dear readers, i have accelerated release of analytical marks about ongoing situation in oil. Very dramatic events in oil market and too much rumors and assumptions. From articles in my feed you can reed about contago and its impact on oil price. There are investors that consider that USO is a good opportunity to avoid contango and to mitigate its impact in long position in oil. There is no free lunch on the financial market and contango is unavoidable in oil trading during any crisis of overproduction. There is no model to trade by oil free and without cost of carry. There is model to reduce its impact and to create the synthetic position that will be relevantly free from contango or negative rollover yield. And i will release this tips for oilgasfund subscribers at trade.collective2.com
Below is depictured how OIL WTI spot price was able restore from the crisis in 2008 and how USO was lagging from oil price due to contango. In reality WTI is untradable and USO is most simple option to trade by WTI oil futures.
In the now days so called Virus crisis has more strong impact of contango and USO value decay has more depth and we still dont now where is a bottom for both WTI oil and USO. What is definitely is that depth of decline for USO will be deeper and rebound will be less aggressive then what we see in OIL spot price that just can be used for informational purpose. As i mentioned it is impossible to trade by oil tracing this price.