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Summer Oil Check
Written by Brad Zigler   
Thursday, 07 August 2008 17:10
It's time to take dipstick in hand and take the measure of exchange-traded oil vehicles (that is, if you're not using the bloody thing as a rapier to slice off the ears of filling station attendants).

As luck would have it, the new MacroShares oil portfolios debuted as crude prices zenithed and arced lower. Well, in reality, they're really the new version of the MacroShares portfolios (see "Gold Vs. Oil"). You'll remember from our previous screeds that MacroShares offers portfolios representing both upside (AMEX: UOY) and downside (AMEX: DOY) wagers on the oil market.

Of particular interest to media and investors alike is the DOY downside portfolio. How much better, many wonder, would a long DOY position be compared with a short position in some of the other long-only (confusing, isn't it?) exchange-traded vehicles such as the United States Oil Fund (AMEX: USO), its contango-dampening sibling, the United States 12-Month Oil Fund (AMEX: USL), the PowerShares DB Oil Fund (AMEX: DBO) and the iPath S&P GSCI Crude Oil ETN (NYSEArca: OIL)?

With a month of MacroShares trading now in our rearview mirror, we can now get a sense of MacroShares' relative performance characteristics.

 

Trading Performance (July 7, 2008 - August 6, 2008)

 

 

Gain/

Loss

Annualized

Volatility

Downside

Variance

Correlation

(NYMEX)

DOY

42.2

78.1

39.7

-75.3

UOY

-23.3

48.1

30.6

89.7

USO

-15.5

39.3

25.1

89.7

USL

-17.9

42.1

25.3

96.7

DBO

-17.6

43.2

25.3

94.9

OIL

-17.0

41.4

24.9

97.9

NYMEX Spot Crude

-16.1

38.9

24.7

--

 

Like the previous iteration of MacroShares oil portfolios, the correlation to NYMEX front-month crude futures is weaker than that exhibited by the other oil-based vehicles. This, however, could be the petroleum version of making lemonade. Using that divergence - ordinarily considered something of a lemon - outsized gains could be obtained using DOY versus short positions in the other securities products (nothing, of course, beat the highly leveraged returns obtainable by shorting futures). Big gain potential, no margin requirement.

 

Exchange-Traded Oil Vehicles

 

Chart: Exchange-Traded Oil Vehicles

 

Now THAT's the makings for a good summer's day: A little drive and a little lemonade ... er, crude oil.

Happy driving.

 

More on this topic (What's this?)
The Recent Oil Price Rise Will Slow or Stop
Oil Price Predicted to Reach Crisis Proportions in 2010
Gold climbs to $1250, Oil at $200
Read more on Oil Prices at Wikinvest
 
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