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.
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.