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Sunday, March 22, 2009

USO vs USL, DXO vs UCO

The most popular blog entry has been my article on USO vs USL. I decided to spend a little time looking back on both of these indexes. There is no way to "own oil" for investing purposes, except trading futures contracts. USO & USL attempt to allow a person to buy an ETF to "represent" the value of oil, and capture the % gain/loss reflecting oil's valuation movements.

USO vs USL
The last blog entry on 2/11/09, I stated USL over the long haul has done better than USO. This is still the case. I also wrote that USO could do better "in the short term" if oil gains value, due to the way these ETF's design. Reviewing USO vs USL from Jan 07, "year to date", and since 2/11/09 (article date), USO did -17%, -12%, and +4.7%, respectively. Therefore if you stayed in USO since the blog article, the ETF performed better.

In any event, the premise that USL over time has retained value better than USO is still correct. In addition, if you want to gain value in the "short term", the ETF's DXO and UCO, "Double long" oil is a better way to capitalize SHORT TERM oil gain. (see more below USO/USL Picture)

From WebSurfinMurf's Financial Blog
DXO vs UCO
Both over the long haul will lose value, due to expenses, but since 1/1/09, DXO and UCO appreciated by +18% and -30% respectively!
WOW, that is a HUGE difference. I couldn't find much details on DXO vs UCO on its fundamentals. If you have better luck, please post in the comments on this blog entry. In any event, its apparent that DXO works "better" than UCO, but that may also be a function of the price of the ETF (DXO 2-3 buck range, UCO 10 buck range)

I believe (unconfirmed) that:
DXO is based on Deutsche Bank Liquid Commodity Crude Oil Index
UCO is based on ^DJAIGCL Oil Index (Dow Jones-AIG Crude Oil Sub-Ind (^DJAIGCL)

Below is the graph of DXO vs UCO Year to Date, and a graph for last 5 business days. Notice that YTD UCO had a 48% difference from DXO, and in the last 5 business days UCO did worse by 1.40%!

Unlike USO/USL, I am unsure why UCO does so much worse than DXO. And frankly, I am not sure I care. The horrific performance difference is enough to look at DXO over UCO.

UPDATE:5/1/09 See entry on leveraged ETF's being Front Runned.

From WebSurfinMurf's Financial Blog

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