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Oil ETF Slides Hard On Contango Tangle

Tyler Durden's picture




 

On Friday we warned that massive retail inflows into the largest crude oil ETF were about to collide head-on with the widest contango in four years leading, in all likelihood, to “carnage.” 

For reference, here was the setup...

…here is the carnage…


...and here is the contango coming in through yesterday until nervous selling drove the April contract lower, pushing the contango wider still, in what could turn out to be a very non-virtuous circle for all of the home gamers out there...

... as it appears we may be at a key level here...

*  *  *

BTFD!

 

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Wed, 03/11/2015 - 11:50 | 5877714 troubledasset
troubledasset's picture

I try to tell people not to buy this ETF. They do it anyway. Some buy the 3X Bull... I just have to walk away at that point.

Wed, 03/11/2015 - 11:51 | 5877719 kowalli
kowalli's picture

Why? You can buy popcorn and watch it in first row.

Wed, 03/11/2015 - 13:16 | 5878131 KnuckleDragger-X
KnuckleDragger-X's picture

Any time I see the words "retail investor" I hear the sounds of bleating sheep waiting their turn to be shorn. This woyld be a great reality show but they'd have to change the names to protect the guilty.

Wed, 03/11/2015 - 14:51 | 5878611 zvzzt
zvzzt's picture

LOL! I have to say, was a bit depressed today, but such remarks simply put a big smile on my face! Also, finally get to use the poporn maker i got the kids for xmas....

Wed, 03/11/2015 - 12:10 | 5877741 ukspreads
ukspreads's picture

And I've been telling sheeples to BTFDAX ever since Draghi announced his bullshit QE.... +3000 points since October last year WTF
Come on Tyler, how about a story on this please? 

Wed, 03/11/2015 - 12:34 | 5877922 kaiserhoff
kaiserhoff's picture

Not a "sky is falling"  story.

Good luck with that;)

Wed, 03/11/2015 - 12:37 | 5877935 ukspreads
ukspreads's picture

Yeah, I guess we'll have to wait for the news of some high profile hedge fund blowing itself up first before there's any mention of it

Wed, 03/11/2015 - 12:53 | 5878012 ukspreads
ukspreads's picture

And the CAC, Remember all the negative reports here about Russian sanctions, spelling doom for the French? 

Well, the CAC reached 5000 today and +25% since Christmas... (It's okay Tyler, I'll report this shit for you)

Wed, 03/11/2015 - 13:08 | 5878091 overexposed
overexposed's picture

What do you think the bottom of this trend is going to be, Tylers?  You planning on throwing up the Bat-Signal for those of us who took your advice on the short side of this trade?  ;)

Wed, 03/11/2015 - 12:30 | 5877906 redux2redux
redux2redux's picture

Kind of like:

I lost $1000 at blackjack and sent another $2000 looking for it...

Wed, 03/11/2015 - 13:17 | 5878138 TheSettler
TheSettler's picture

DWTI, UWTI 3X...in and out, sometimes 5 minutes...never more than 5 days...

 

Wed, 03/11/2015 - 11:50 | 5877717 winflation
winflation's picture

Fully deserved losses.

Wed, 03/11/2015 - 11:57 | 5877744 pragmatic hobo
pragmatic hobo's picture

uso is the worst investment vehicle and particularly so in contango.

Wed, 03/11/2015 - 12:20 | 5877847 JamaicaJim
JamaicaJim's picture

Really?

Investment vehichle? Or trading it.

Sounds like you are a shitty trader, or have no investment excperience.

I've made money on USO...as well as other ETF's.

Entries and Exits son....tighten up

Wed, 03/11/2015 - 12:45 | 5877966 Traderone
Traderone's picture

Yes Sir.

Wed, 03/11/2015 - 11:59 | 5877750 juggalo1
juggalo1's picture

You'd think the market would provide some means for individuals to get exposure direct to crude oil as a commodity, but this ETF has certainly failed in that regard.  They used to have the crude up / down pair, which would have avoided this issue, but it folded too.  Maybe they need an ETN?

Wed, 03/11/2015 - 12:27 | 5877890 troubledasset
troubledasset's picture

Royalty trusts.

Wed, 03/11/2015 - 12:45 | 5877955 Quinvarius
Quinvarius's picture

USL holds twelve months of contracts.  The monthly roll over contango rape is not so bad.  It probably has other issues due to holding 12 months of contracts all approaching lows to match the front month though.  I'm just saying it is out there.  I personally have no good ideas on what this sector is going to do.  Maybe I will look at it when Obama starts dumping from the SPR at the lows like Bush did.

Wed, 03/11/2015 - 12:00 | 5877758 Gordon Freeman
Gordon Freeman's picture

Just one of TD's endless string of bullshit "disasters"...Must be a slow news day.

Wed, 03/11/2015 - 12:14 | 5877818 thamnosma
thamnosma's picture

somebody has to compete with King World News

Wed, 03/11/2015 - 12:17 | 5877834 JamaicaJim
JamaicaJim's picture

Contango, Fandango....let the party begin.

I prefer the Samba, but the Cha Cha is also nice....

Wed, 03/11/2015 - 13:04 | 5878070 thamnosma
thamnosma's picture

Man, you gotta check out Boogaloo

Wed, 03/11/2015 - 12:20 | 5877849 Soul Glow
Soul Glow's picture

Tyler you had an article last week in which you guessed this would happen.  Nice call.

Wed, 03/11/2015 - 12:24 | 5877872 Lmo Mutton
Lmo Mutton's picture

Thread needs moar Brazil bikinis.

Wed, 03/11/2015 - 12:30 | 5877904 observiate
observiate's picture

i'm buying "the dip" in the form undervalued royalty trusts and energy equities, for the long term, and for dividends.  empirical academic evidence suggests this strategy will win in the long term no matter how rigged the market may or may not be.  but i'm a boring guy, so to each his own.  personally, i love these types of durden stories though because of the sensationalism aspect.

Wed, 03/11/2015 - 13:03 | 5878054 freedogger
freedogger's picture

How do you know its a dip?

Wed, 03/11/2015 - 12:37 | 5877936 kaiserhoff
kaiserhoff's picture

Most ETFs have outrageous carrying costs, due to the losses when rolling the contracts forward, as the Tylers have described well in the past. 

That must be why they are so popular..., or maybe it's the lipstick.

Wed, 03/11/2015 - 13:36 | 5878245 Miffed Microbio...
Miffed Microbiologist's picture

We little ants got brazenly cocky once and tried to play with ETFs, got quickly spanked and ran away properly educated we were out of our league. I can't believe retail investors are being seduced by this. Probably some unscrupulous advisors.

Miffed

Wed, 03/11/2015 - 14:01 | 5878372 kaiserhoff
kaiserhoff's picture

Congrats, Miffed.

   We smarter ants learn from experience;)

Wed, 03/11/2015 - 17:30 | 5879212 Miffed Microbio...
Miffed Microbiologist's picture

Thank god we had the smarts not to bet the farm but the experience still smarts. That's a good thing. Pain is the greatest teacher.

Miffed;-)

Wed, 03/11/2015 - 14:09 | 5878415 MeelionDollerBogus
MeelionDollerBogus's picture

http://scharts.co/1HDllE3

I'm keeping an eye out, 

47.77, WTIC

7.80, HOU.TO
292.561 now, trend 270 = WTI2 / HOU (tsx)

Wed, 03/11/2015 - 14:11 | 5878423 MeelionDollerBogus
MeelionDollerBogus's picture

That's why comparison of the ETF price to the underlying oil price should be computed and checked using a scatterplot

Wed, 03/11/2015 - 18:02 | 5879324 JoWazzoo
JoWazzoo's picture

Couple of suggestions.  Identify the dates that USO Rolls.  Also - graph that are legible would be nice.  Thanks.

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