ProShares has rolled out an actively managed oil exchange traded fund to help diminish the negative effects of a futures market in contango and remove the hassle of having to fill out a K-1 form come tax season.
On Wednesday, ProShares launched the ProShares K-1 Free Crude Oil Strategy ETF (BATS: OILK). OILK has a 0.65% expense ratio.
OILK is an actively managed fund that provides exposure to the West Texas Intermediate crude oil futures market. Ryan Dofflemeyer, Portfolio Manager at Proshares, will manage the ETF.
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The active oil ETF will try to outperform certain index-based strategies by actively managing the rolling of WTI crude oil futures contracts, according to a prospectus sheet.
A commodity futures-based ETF rolls contracts when it sells a futures contract that is set to expire and replaces it with a new later-dated contract to avoid physical delivery of the commodity. However, when rolling futures contracts, there is a chance that contango can negatively affect the performance of the fund – contango occurs when later-dated contracts cost more than near-term contracts, which results in a negative roll yield, so the ETF would essentially sell low and buy high during each roll.