Examining Oil’s Dead Cat Bounce (USO)

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July 7, 2017 11:03am NYSE:USO

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Crude Oil and linked ETFs have been very active this week not to mention volatile.

Lately we have seen August 8.50 put activity in the largest Crude Oil tracker USO (U.S. Oil Fund, Expense Ratio 0.77%), as the ETF closed yesterday at the $9.31 level but is being punished in today’s session, down close to 3%.

Just eleven trading sessions ago however the fund traded at a new 52-week low at the $8.65 level, so it is apparent that hedgers are entering the picture here given the recent dead cat bounce in Crude Oil. Year-to-date, USO has seen decent inflows to the tune of about $465 million in (with a total of over $3 billion in AUM currently), and it continues to hold the number one spot in the “Crude Oil” category in terms of its asset supremacy, which has been the case for years on end here since the fund’s inception in 2006, even taking into account well-documented issues that the fund has with contango.

The second largest fund in the category is the levered Bull product UCO (ProShares Ultra Bloomberg Crude Oil, Expense Ratio 0.95%, $883 million in AUM), which has also seen substantial asset inflows year-to-date (over $325 million in), presumably from portfolio managers whom have been positioning for a bounce in Crude prices.

As we have mentioned before in this piece and is currently the situation as well, the top end of “Crude Oil” linked ETPs in the spectrum all have a long bias, starting with USO and going throughout the top five funds in the space where DBO (PowerShares DB Oil, Expense Ratio 0.75%, $393 million in AUM) is the fifth ranked fund in terms of AUM.

The first “Inverse” or “Bear” ETP shows up at number six in this space in terms of asset size, the $127 million SCO (ProShares Ultra Short Bloomberg Crude Oil, Expense Ratio 0.95%) which has seen notable net outflows (-$145 million out) year-to-date. However, in the midst of the recent downside put buying in USO, given what some may see as a “dead cat bounce” type rally, it pays to make note of not only SCO but other Bear and Levered Bear ETPs in the space as they may very well see an uptick in interest in the near term.

These funds are DWT (VelocityShares 3X Inverse Crude Oil ETN, Expense Ratio 1.35%, $35 million in AUM), WTID (UBS ETRACS-ProShares Daily 3X Inverse Crude ETN, Expense Ratio 1.85%, $39.4 million in AUM), and the much smaller OILD (ProShares UltraPro 3X Short Crude Oil ETF, Expense Ratio 0.49%, $5.6 million in AUM), and SZO (PowerShares DB Crude Oil Short ETN, Expense Ratio 0.75%, $2.5 million in AUM).


The United States Oil Fund LP ETF (NYSE:USO) was trading at $9.04 per share on Friday morning, down $0.27 (-2.90%). Year-to-date, USO has declined -22.87%, versus a 8.00% rise in the benchmark S&P 500 index during the same period.

USO currently has an ETF Daily News SMART Grade of C (Neutral), and is ranked #52 of 130 ETFs in the Commodity ETFs category.

Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.

About the Author: Paul Weisbruch

paul-weisbruchPaul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and ETFTrends.com for instance.

He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.

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