Comments on: Know What’s in Your ETF and How the ETF is Calculated

By: Investor Hub

Investor Hub — Wed, 28 May 2008 17:34:55 +0000

Hey, Thanks for this informative post. From a long time I was wondering about this topic. Its good some one has covered it in this depth.

By: hello all

hello all — Tue, 27 May 2008 16:57:12 +0000

or if you’re bearish the energy complex, you can short coal/KOL/MEE, etc. as a proxy…..or
solar plays (but getting hard to find shares).

Or the tanker stocks.

Or go long DEE (big spreads and hope that DB stays solvent, ha).

By: Michael

Michael — Tue, 27 May 2008 11:24:16 +0000

DCR might be good if it wasn’t about to disappear:

From an article at Bespoke :

In early April, we pointed out the DCR/UCR trade to Bespoke readers, noting that if oil closed above $111 for three consecutive days, the two notes would hit termination at the end of the quarter at wherever their NAVs were trading. UCR is the “oil up” note and its NAV is calculated by dividing the price of oil by three. DCR is the “oil down” note and it is calculated by subtracting UCR’s NAV from 40.

Once oil closed above $111 for three days in a row (seems so long ago), the termination triggered, so at the end of this quarter, the notes will be distributed to holders at their NAVs. But now that oil is trading above $120, DCR has no NAV [40-(120/3)=0]. Surprisingly, DCR’s price is still trading at a premium to its NAV, and if oil is above $120 at the end of the quarter, owners will lose all of their money, effectively making it an option play on oil’s decline at this point. UCR, on the other hand, will distribute $40 per share if oil is above $120, even though its price is trading at $37.26.

Also see this article for more on DCR

By: Sia

Sia — Tue, 27 May 2008 07:31:17 +0000

Yessss. I actually emailed them on friday saying they should be ashamed for not even knowing what the ETF really is. Also, a while ago they kept saying OIH is a proxy for the refiners, which in reality is a better proxy for oil services and drillers. A lot of people don’t even take the time to figure out what stocks are behind an etf, its a shame.

By: joshm

joshm — Tue, 27 May 2008 04:49:25 +0000

What about using dcr:

http://finance.google.com/finance?q=dcr&hl=en

By: beanieville

beanieville — Tue, 27 May 2008 01:36:34 +0000

Lots of unsettled spirits at the USO july 100 puts on thursday.

We joined them.

Death to oil.

By: Will

Will — Tue, 27 May 2008 00:57:10 +0000

Hi Mike! Still follow ya regularly, buddy. Thanks for yet another insightful post which gave so many of us an “aha!” moment.

By: TraderMD

TraderMD — Mon, 26 May 2008 22:45:30 +0000

In short, the DUG is the inverse of the DIG.

The DIG is basically an ultra version of the OIH.

Hopefully that wasn’t too confusing.

By: Michael

Michael — Mon, 26 May 2008 16:26:36 +0000

Walonline,

It’s not long those producers, it’s short. It’s short the index which is long the oil & gas companies. The key thing I was trying to get across is that the movements of those companies can be independent of the actual price of oil in the short term.

By: Walonline

Walonline — Mon, 26 May 2008 15:57:04 +0000

Great article, Mike.

Really interesting that an ETF designed to short the oil and gas markets is long on such a large portfolio of major producers. Could this be a frontier for further regulation, or simply another case showing the importance of really knowing your investments? I believe the later.