Comments on: Oil Double Long ETN (DXO)

By: Wednesday’s Links- 2 Vids, A Lesson, Black Gold Value Plays

Wednesday’s Links- 2 Vids, A Lesson, Black Gold Value Plays — Tue, 08 Sep 2009 04:23:21 +0000

[...] – A way to play it [...]

By: The End of DXO - Double Leveraged Long Crude Oil | Penny Stock Trading System Blog

Thu, 03 Sep 2009 05:42:17 +0000

[...] “Double Long Crude Oil DXO” (Chris Perruna.com) [...]

By: chrisperruna.com » Blog Archive » Trading DXO on Twitter

chrisperruna.com » Blog Archive » Trading DXO on Twitter — Sat, 11 Jul 2009 15:13:15 +0000

[...] 2/09/09 Blog Post: Play with fire and you get burned – that’s what they say. I guess it doesn’t appear to be smart to leverage yourself (2x’s) with crude oil futures through an ETN but that’s precisely what I started to do in December. My tool of choice: DXO Oil Double Long ETN [...]

By: mark

mark — Thu, 26 Feb 2009 02:02:59 +0000

Chris,
I would advise you to be careful with ETNs.
DXO, I believe, is an obligation of Deutsche Bank
London which means there is counter party risk.
UCO is an ETF that has futures contracts as well as swaps however their swaps are with multiple counterparties. There is enough risk trying to catch a trade in the commodity without having to worry about getting paid if you win.

By: Chris

Chris — Tue, 17 Feb 2009 02:07:05 +0000

Disclaimer: Please do not invest in ETN’s if you do not understand the inner-workings of the instrument. I will possibly look to prepare a blog post that can explain how they work (DXO in this case) in simplified terms.

Please stick with stocks (simple equities) if you are uncomfortable trading alternate instruments.

Sorry for the confusion I may have caused to some of you – it was not my intention.

-Chris

By: Eric

Eric — Mon, 16 Feb 2009 14:51:58 +0000

I am interested in investing in oil but am nervous about making it a long term investment. I’ve personally seen the negative effects of investing in leveraged funds long term and now try to keep the trades to a few days or shorter. I also recently read about “contango” and how it can negatively affect these Oil ETN/ETFs:
http://www.indexuniverse.com/blog/5362-uso-oil-usl.html

I’m no expert on the subject and am still trying to educate myself but it seems like long term investments in these vehicles can lead to losses or smaller returns even if the spot price of oil is increasing. I would love to hear the other side of the argument, however.

By: andrew bailey

andrew bailey — Fri, 13 Feb 2009 18:13:17 +0000

I like betting on oil, but I must confess am not sure how this DXo is structured. Is it correlated directly to price of oil x2…If oil increase 50% over the next year will DXO go up by 100%…I am not sure it is that simple…
I WANT TO INVEST IN THE PRICE OF OIL GOING UP IN THE LONG RUN (NEXT 3-5 YEARS), WHAT IS THE BEST WAY TO DO THAT…????

By: Monster's Dad

Monster's Dad — Wed, 11 Feb 2009 01:39:20 +0000

I agree that ETNs and 2x are more dangerous than people realize and they must understand before they buy. The 2x is only advertised to be 2x on a given day. Over time it does not work that way. You also don’t know when you are going to get a dividend because they don’t want to advertise that and cause front running. ETN are time limited, so like an option, you could be right, but not at the right time and it goes away or decays. Compare a 6 month chart of USO/DXO. USO down 70%, DXO down 88%. 1 month USO down 18% DXO down 15%. If not double during down, how could it be double during up trend. There is one point on the 1 month comparison where USO is up 6% but DXO appears down 8%. Too unpredictable.

By: Maninder

Maninder — Tue, 10 Feb 2009 15:21:14 +0000

Hello Chris:

Same as you I have put some money in DXO. I bought some at 2.75 and will wait for some sort of trend to invest the rest. However I must admit that I am having a hard time figuring out how the returns are calculated with this instrument. The price resets every day. To that end I have also leveraged some money in USO. As a rule of thumb, I generally do not invest in something I do not understand clearly but to me this is the right time to put some money in OIL from a long term investment perspective. Did some research after your first BLOG on DXO and found that most of these instruments (ETN or ETF’s) are complex in the way they track oil.

Maninder

By: Neil

Neil — Tue, 10 Feb 2009 05:41:00 +0000

I’m not sure if I like DXO – leverage through ETFs/ETNs can sometimes really make the value decay, or just behave irrationally.

I did buy USO and UNG recently, and will be looking to hold them for a year or two at least.

Thanks for the blogs, keep ‘em coming.