Is USO a safe bet? Am I going to get rekt? Thanks guys.
It's not a safe bet at all, and it has nothing to do with whether oil continues to fall.
USO will only be profitable if oil makes a significant move during the current month's contract. There is always price decay when the contract rolls over the next month. So USO will lose money in any period where:
-Oil goes down over any time frame
-Oil stays flat over any time period
-Oil goes up on a month-to-month basis by less than the difference between the prior month futures contract and the current month futures contract
USO is not "investing in oil". It's making a short term bet that oil will rise before the current futures contract expires.
uso is a terrible investment number 1 because of contango. Secondly there isnt value in just buying oil contracts unless you own an oil refinery. If you want to make money on low oil prices buy shell gazprom chevron or exxon. maybe even bp or some pipeline mlps but for christ sakes dont speculate on raw crude like a goy.
Google contango and go from there
The math is pretty simple, though. If the February contract is 30.00, and the March contract is 30.50, then when USO has to roll it's contracts forward it sells Feb for 30 and buys March for 30.50. So now it has 1.67% less exposure to the spot price of oil.