Welp. USO got permabanned from trading Oil.
Extremely popular ETF among retail investors United States Oil Fund got banned from trading Oil. Less than 1 month after a 1 to 8 reverse split.
The number of holders on Robinhood, a popular broker among retail investors, has been going up despite all the negative news.
Actually it has been going up more the more negative news there have been.
How to write about this without looking sarcastic or making it look like a parody? I assure you all I am writting is true.
With Oil prices crashing the ETF saw about 2 months ago a massive influx of investors and hit their limit.
They have responded (after losing alot of their investors money and getting limited by the CME & regulators) by spreading their positions over several months.
On April 29th they did a, 8 to 1 reverse split to not get delisted. The price has kept going up since then, perhaps because of all the investors with less than 8 shares that bought back in.
According to a Thursday SEC filing made by the ETF, RBC Capital Markets, their broker, has informed the fund running USO that they could no longer buy oil futures and not even hold oil positions. USO response has been to say they may hold larger amounts of cash & cash equivalents and treasuries (zero or even negative yielding US treasuries).
RBC reason is speaking in layman terms to not end up like Lehman Brothers.
Despite being down 75% YTD USO AUM have quadrupled (and would have done more than this had they not hit the limit).
ycharts.com/companie...ets_under_management
RobinTrack data shows that the number of accounts holding USO has soared by about 2000% since March.
So... if they are at the limit, they money they lose can be replenished by new buyers and they can remain at the upper limit forever? (As long as new buyers join).
They might have to redesign their offer, since they cannot hold oil anymore. I guess they're just going to hold "investors" money in cash & bonds while collecting fees.
Let's see what the regulators say. People wanted to buy Oil but we all know they just want to buy something deep in the red and even if the ETF changes they are not going to sell because they enjoy holding losers. They might even be interested to buy more. Seriously. The keyword is "emotional" but better than this would be "irrational" and even better - I have to - is my own description "complete morons".
Of course technical analysts do not need to read the news and knew all of this before it even happened thanks to their magical little oscillators and tools.
Retail investors are unphased and ignoring this "FUD". I expect them to buy more, probably expecting an investment in their own money at a fee to magically go up.
When I'm doing my research I'm angry and ranting half of the time but also I'm just laughing in front of my screen half of the time. I love my 'job'.
The number of holders on Robinhood, a popular broker among retail investors, has been going up despite all the negative news.
Actually it has been going up more the more negative news there have been.
How to write about this without looking sarcastic or making it look like a parody? I assure you all I am writting is true.
With Oil prices crashing the ETF saw about 2 months ago a massive influx of investors and hit their limit.
They have responded (after losing alot of their investors money and getting limited by the CME & regulators) by spreading their positions over several months.
On April 29th they did a, 8 to 1 reverse split to not get delisted. The price has kept going up since then, perhaps because of all the investors with less than 8 shares that bought back in.
According to a Thursday SEC filing made by the ETF, RBC Capital Markets, their broker, has informed the fund running USO that they could no longer buy oil futures and not even hold oil positions. USO response has been to say they may hold larger amounts of cash & cash equivalents and treasuries (zero or even negative yielding US treasuries).
RBC reason is speaking in layman terms to not end up like Lehman Brothers.
Despite being down 75% YTD USO AUM have quadrupled (and would have done more than this had they not hit the limit).
ycharts.com/companie...ets_under_management
RobinTrack data shows that the number of accounts holding USO has soared by about 2000% since March.
So... if they are at the limit, they money they lose can be replenished by new buyers and they can remain at the upper limit forever? (As long as new buyers join).
They might have to redesign their offer, since they cannot hold oil anymore. I guess they're just going to hold "investors" money in cash & bonds while collecting fees.
Let's see what the regulators say. People wanted to buy Oil but we all know they just want to buy something deep in the red and even if the ETF changes they are not going to sell because they enjoy holding losers. They might even be interested to buy more. Seriously. The keyword is "emotional" but better than this would be "irrational" and even better - I have to - is my own description "complete morons".
Of course technical analysts do not need to read the news and knew all of this before it even happened thanks to their magical little oscillators and tools.
Retail investors are unphased and ignoring this "FUD". I expect them to buy more, probably expecting an investment in their own money at a fee to magically go up.
When I'm doing my research I'm angry and ranting half of the time but also I'm just laughing in front of my screen half of the time. I love my 'job'.
"Effective 22 June, WisdomTree Oil Securities will be closed entirely and all nine ETPs which trade under this umbrella will stop trading as a result."
SEC filings by USO can be found here.
sec.report/CIK/0001327068
Might not be interesting to short USO, if they just shutdown like WisdomTree funds did.
Not a stock expert I don't know what happens then.
Maybe options are the way to go?
USO if I understand correctly, can take more investors now that they did a reverse split? (They hit the limit of 4 billion shares issued I think) They probably gave up on their request to issue more shares I'd assume.
"The registrant had 185,362,500 outstanding shares as of May 6, 2020."
They already lost so much money, I think someone calculated that compared to Oil, because of rollover costs they lost on average 17% a year.
That's a seriously negative sum game!
In Q1 they posted losses of 1.6 billion, and issued so much shares
"According to data from S3 Partners, from Feb. 27 to April 21 “short sellers went into overdrive.” The firm said that over the two-month period short sellers tripled their positions, ultimately pocketing around $286 million for a 110% return through Tuesday."
The 21 April the price bounced hard, might be the trace of short sellers taking their money.
I wonder if USO will get more cash influx?
This fund is a complete catastrophy, and I still expect retail bagholders to hold onto it regardless of it holding Oil Treasuries cash beanie babies or casino tokens, and either expect to make money gambling or hold onto the bag hoping it somehows regains its previous value.
They might, actually all commodity ETF other than those that hold commidities in vaults of warehouses (it exists) might, get banned. It is a shame for funds that were using them in the short term, but once again really bad investors win and ruin it for every one. Not that these stocks were that great, not a big loss if they all get shut down.
It looks like the people running USO are playing with the limits of legality here.
They really want that investor money. The hype might also be over and the ETF will slowly but surely bleed out, especially if they are requested to reduce their Oil positions and end up just holding cash & ZN etc.