Warren Buffett is credited with saying that stock pickers are the only people that can make fortune tellers look good. I wrote Thursday about why oil prices have been tanking lately. So this piece caught my eye today:
Tuesday’s ETF To Watch: Ultra DJ-UBS Crude Oil UCO ETF DAILY NEWS:
In light of crude’s recent behaviors, today’s ETF to watch will be the Ultra DJ-UBS Crude Oil (NYSEARCA:UCO). This fund employs a 2X leverage on crude oil futures, making it one of the most volatile but potentially rewarding funds to play this commodity. Though the fund does not have much in the way of assets ($234 million), it is a popular trading instrument, as it currently has an average daily volume of 1.1 million shares.ETF means electronically traded fund, analogous to a mutual fund, but with a very narrow market focus and that can be traded throughout the day, rather than at only the closing price as an ordinary mutual fund. UCO is a long fund, meaning its price rises when oil's price rises. "2X leverage" means that the price of the fund should double the price moves of the underlying commodity. If oil goes up one percent, then the fund price should go up two percent. If oil falls X percent, then UCO's price will fall 2X percent.
So at the end of this little piece we find this sage advice:
If crude continues to slide into tomorrow’s trading session, UCO will get crushed, but if the commodity were to see some relief, this ETF will profit handsomelyAnd that, ladies and gentlemen, is what we call a BGOO - a Blinding Glimpse of the Obvious. Once again, I am reminded of Will Rogers' advice on how to make money trading stocks: "Buy a stock when the price is low and sell it after it goes up. If it doesn't go up, don't buy it."
BTW, UCO dropped more than 3.5 percent today.
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