Fund (UNG),” Brian Baskin Reports From The WSJ.
“The fund will take the funds generated from issuing shares to open short positions in oil futures, or bets that prices will fall. Share prices will rise when oil futures fall in value, and vice versa. Oil prices have fallen by more than $5 a barrel over the last two days, after the Department of Energy reported an unexpected increase in U.S. oil inventories, adding to an existing surplus,” Baskin Reports.
“The sponsor of DNO is United States Commodity Funds, which now has six active energy-related funds covering crude oil (USO and USL), natural gas (UNG), heating oil (UHN) and gasoline (UGA). DNO is the company’s first inverse product. Now may seem like not such a good time to introduce another commodity-based product, given the recent regulatory confusion. Moreover, DNO’s use of exchange-traded futures contracts means there could be a cap on its asset size. The sponsors may be calculating that they can operate the fund profitably at a lower size,” Patrick Watson Reports From Invest With An Edge.
“DNO is not the first inverse oil product. PowerShares DB Crude Oil Short ETN (SZO) began trading in June 2008. Additionally, there are two leveraged inverse crude oil products: PowerShares DB Crude Oil Double Short ETN (DTO) and ProShares UltraShort DJ-UBS Crude Oil (SCO). The intricacies of tracking energy futures, swaps and other derivatives means that DNO could have considerably different results than the existing products, even after adjusting for leverage,” Watson Reports.
About the new fund (DNO): The investment objective of the Fund is to have the changes in percentage terms of its units’ net asset value inversely reflect the changes in percentage terms of the spot price of light, sweet crude oil delivered to Cushing, Oklahoma, as measured by the changes in the price of a designated benchmark futures contract on light, sweet crude oil as traded on the New York Mercantile Exchange, less the Fund’s expenses.
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