They might have gotten together and bought a tropical and maybe even 12,000 copies of this Wu-Tang album.
But instead a wide-range of investors collectively spent about US$24 billion over the past 18 months trying C and failing C to call a bottom in oil. Never within the good reputation for exchange-traded funds has one particular category drawn so much money from investors performing a rebound. Absolutely not all this cash is gone (yet), although certainly a variety of it has evaporated along with the cost of crude.
During that time, investors plowed US$12 billion into ETFs that track oil stocks while plowing another US$12 billion into ETFs that track oil futures. The table below shows the two most popular ETFs in each category C but more importantly it implies that this trade was popular with nearly every type of investor in the best of traders including hedge funds, in addition to ‘mom and pop’ retail investors.
The SPDR Energy Select Sector ETF (XLE), which tracks oil-related stocks such as Exxon Mobile Corp., Chevron Corp. and Shlumberger Ltd.. This ETF is well-liked by asset managers and traders alike thanks to its oceanic liquidity and it is diversification. The Vanguard Energy ETF (VDE) does the same thing but is used almost exclusively by advisors and retail investors. (Yes, even grandma thought oil will come back).
On sleep issues of the tracks you have the Usa Oil Fund (USO), which holds near month NYMEX futures on WTI crude oil. The trader and hedge fund crowd prefers USO since it is the most sensitive ETF to short-term pops in spot oil. It’s also very liquid while offering the benefit of rolling the futures for you, albeit is affected with severe roll costs if held over the longer-term.