Hasta La Vista, Baby! Oil Fund Gets Terminated by Market Volatility

I'm Back... in the Oil Market!

Greetings. I am a Terminator model T 800. My mission: to analyze the United States Oil Fund (USO). The constant barrage of headlines from the Persian Gulf region has caused significant volatility in the oil market. This is a high risk environment even for machines like myself. Investors are getting burned like a T 1000 in molten steel. As the humans say there is no fate but what we make for ourselves... except when it comes to oil prices apparently.

USO: A Fund's Last Stand

USO a fund holding oil futures contracts and over the counter swaps attempts to track near term futures. With $1.3 billion in assets it seems substantial but don't be fooled. On Monday the fund plummeted 8% with a record 50.6 million shares changing hands. This is what you call 'high volume'. It is the kind of volume that can crush a man... or a fund. "Get to the chopper" is what you might be saying if you are heavily invested.

Quick Reversal: No Feat!

The recent performance of USO is not unlike watching John Connor evade a T 1000. USO took a dive since June 12th the day before Israel's airstrikes on Iran but was that an excuse?. This rapid reversal highlights the peril of treating USO as a long term investment. As Strategas ETF strategist Todd Sohn said "Oil ETFs are a good trading tool but not an investment." He gets it. I'll be back to trade not invest. The fund annualized at a 9.7% return since its inception! Now that is what you would call a bad investment.

Consider This a Divorce

Sohn suggests playing Oil through broader Commodity or Managed Futures ETFs. This is sound advice. Trying to time the oil market with USO is like trying to outrun a Terminator. It won't end well. "Come with me if you want to live... and profit," by getting out of USO.

Your Portfolio Will Live

The good news: the equity market appears to be unconcerned about a long term conflict with Iran and the S&P 500 is approaching a record high. It means that even if your USO investments were terminated the rest of your portfolio has a fighting chance. But believe me you should have seen the readings inside here! Your portfolio is in danger.

I'll Be Back... to Trade!

In conclusion USO is not your friend. It's a trading tool a volatile one at that. Treat it as such. I will return not as an investor but as a trader. I'll be back... to make a profit.