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The constant stream of headlines out of the Persian Gulf has led to a highly volatile oil market and a steep pullback in a fund that has burned investors plenty of times before. One of the most direct ways for regular investors to play in the oil market is the United States Oil Fund (USO) , which holds oil futures contracts and over the counter swaps. The fund is designed to mirror the changes in the near-term futures market. USO, which was created in 2006, has about $1.3 billion in assets under management. On Monday, when the fund dropped 8%, more than 50.6 million shares of USO changed hands, according to FactSet. That is highest daily share volume since 2020 and, according to Strategas ETF strategist Todd Sohn, the highest daily notional value traded for the fund ever. USO 1M mountain The United States Oil Fund (USO) has seen big moves in both directions over the past month. USO fell again on Tuesday and has now given back all of its gains since June 12, the day before Israel launched airstrikes on Iran . That type of quick reversal is not unusual in the oil market, and it is a microcosm of the risk in treating the fund as a long-term investment. “Oil ETFs are a good trading tool, but not an investment. The United State Oil Fund (USO) traded a record amount of notional volume yesterday, yet the fund has annualized at -9.7% since inception. … It’s hard to find many ETFs outside of the Vol spectrum with similar returns. We’d focus on playing Oil through broader Commodity or Managed Futures ETFs,” Sohn said in a note to clients. The good news for investors who may have dabbled and lost in the USO over the past few weeks is that the rest of their portfolio is probably doing just fine. The equity market appears to have shrugged off concerns of a long-term conflict with Iran, and the S & P 500 is within striking distance of a record high .
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