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A comment on Individual Investors Get Burned by Collapse of Complex Securities. Parent comment

Re:Individual Investors Get Burned by Collapse of Complex Se... by Enginerrrd on Monday June 01, 2020 @03:47PM (#23382892)
I learned this the hard way during the 2008(ish) crisis when oil dropped from $150/barrel to ~$30/barrel and I sold other assets at a loss to buy USO (an ETF that was ostensibly supposed to track the price of oil). Instead, when oil went up to $80/barrel in a few months, USO increased by ~3% while the other stuff I'd sold at a loss had rebounded (though to a lessor extent than the price of a barrel of oil).

SOMEbody made a multigenerational fortune off of that price discrepancy. The SEC was briefly investigating that episode, but the investigation went away after a while.

As a little guy, you can make a brilliant play by correctly predicting the future and still get totally screwed.

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Re:Individual Investors Get Burned by Collapse of Complex Se... by haltingproblem on Monday June 01, 2020 @06:16PM (#23384655)
Sorry to hear that atleast you learnt the lesson early. The big flaw is understanding the myth of the "price of oil". There is no such thing. There are grades and dates and delivery locations and the price of storage. You are trading to one point in this multi-dimensional space. In normal times it appears in just one dimension - time - but it times of stress, it explodes.
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Re:Individual Investors Get Burned by Collapse of Complex Se... by jdsully on Monday June 01, 2020 @04:22PM (#23383307)
That futures rollover is a real killer, the winners were sellers of the contracts knowing the ETF would be forced to rollover.
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Re:Individual Investors Get Burned by Collapse of Complex Se... by toomuchtodo on Monday June 01, 2020 @04:17PM (#23383254)
Why did you use USO instead of trading oil futures contracts?
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Re:Individual Investors Get Burned by Collapse of Complex Se... by chadash on Monday June 01, 2020 @04:26PM (#23383352)
Same here with USO. I didn't fully understand it at the time, so I used USO because you can buy and sell like a stock. I thought that it would just be a proxy for investing in oil futures contracts, similar to how buying SPY is basically a proxy for buying a weighted basket of stocks in the S&P. I learned that I was wrong the hard way (luckily didn't wager anything I couldn't afford to lose).
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