Claymore Macroshares exchange traded funds (ETFs) serve as proxies for the price of crude oil.  Roger Nusbaum of writes the Macroshares Oil Up (UCR) and the Macroshares Oil Down (DCR) don’t actually own any crude oil futures. The idea is that Oil Up tracks the price of crude oil and the Oil Down does the inverse. The price of one is correlated to the expense of the other and there is a transfer of assets back and forth to maintain a certain balance.

The theory was to make it easy for investors to invest in crude oil without worrying about the dynamics of the futures market.  However, there are some issues with the ETFs that are causing a premium/discount problem that Claymore did not expect.  One is there is more volume in Oil Up and market efficiencies have taken over.  Another problem is contango, which is the cost of rolling to the next month’s contract if it is priced higher than the current month.  This is one thing the ETFs were supposed to avoid.

Claymore is working on the issues and wants to clear things up before launching similar products in the future.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.