USO - The United States Oil ETF

Spotlight on USO, The US Oil ETF

Stock Ticker

ETF Ticker: USO

Name: United States Oil ETF

ETF Provider: US Commodity Funds & ALPS

Asset Tracked or Index Benchmark: The Price of West Texas Intermediate ("WTI") light, sweet crude oil

ETF Category: Oil ETF, Commodity ETF, Energy ETF

Description of USO

USO tracks the price and performance of West Texas Intermediate light, sweet crude oil. The fund consists of futures contracts for different oils, gases, and petroleum based-fuels.

At times the oil ETF may consist of options on oil futures contracts, forward contracts for oil, and OTC transactions based on the price of oil.

The investment objective of USO is for the daily changes in percentage terms of its shares' NAV to reflect the daily changes in percentage terms of the spot price of light, sweet crude oil delivered to Cushing, Oklahoma, as measured by the daily changes in price of USO's Benchmark Oil Futures Contract, less USO's expenses.

USO's Benchmark is the near month crude oil futures contract traded on the NYMEX. If the near month futures contract is within two weeks of expiration, the Benchmark will be the next month contract to expire. The crude oil contract is WTI light, sweet crude oil delivered to Cushing, Oklahoma.

USO invests primarily in listed crude oil futures contracts and other oil-related futures contracts and may invest in forwards and swap contracts.

These investments will be collateralized by cash, cash equivalents, and US government obligations with remaining maturities of two years or less.

There is some controversy about USO and other commodity ETFs regarding the inability to accurately track the underlying asset and one result has been the limitation of futures in exchange traded funds.

How this pans out remains to be seen.

Benefits of Investing in USO

  • USO offers commodity exposure without using a commodity futures account.
  • USO provides "equity-like" features including, intra-day pricing, and market, limit, and stop orders.
  • USO provides Portfolio Holdings, Market Price, NAV and TNA its website each day.

Top Holdings in USO: US T-Bills, NYMEX WTI Crude Oil Futures, and cash in US Dollars

For full information about this fund, be sure to visit the full USO Fact Sheet on the US Commodity Funds website

Keep in mind you have to be disciplined in your selection process of any exchange traded product. While ETFs and ETNs offer a lot of advantages, they are not without risk. No asset is risk-free. So be sure to research any exchange trade products on this list before making any trades.

Look under the hood and see what is in the ETF, take a look at its performance history and see how it reacted to different market conditions. And if you have any questions or concerns, be sure to consult a financial professional such as a financial advisor or your broker.

However, once you have conducted your due diligence, then I wish you success (and profits) for all of your trades.

Disclaimer - At the time of publication of this article, I do not have any open positions in USO - Mark Kennedy