USO: The Oil ETF

Today Victoria Bay Asset Management LLC is launching a new Exchange Traded Fund (ETF) named as the United States Oil Fund. The new ETF is slated to trade in American Stock Exchange under the ticker symbol USO. Individual investors have long had access to mutual funds that invest in energy companies, but this new oil ETF provides a direct exposure to crude prices without requiring a futures account. Oil ETFs are not new in the world market. They already trade on exchanges in Britain and Mexico.

The fund's investment objective is to reflect the performance of the spot price of West Texas Intermediate (WTI) light, sweet crude oil delivered to Cushing, Okla., minus expenses. It is structured as a commodity pool and will provide access to crude oil without requiring individuals to trade on the futures market. It will invest in energy futures contracts, cash-settled options and other instruments to achieve the oil exposure, and it will also hold short-term Treasurys. Since ETFs trade like stocks, the oil fund would allow investors to take a long position in the commodity, as well as hedge against losses by going short.

The newest ETF on the street will have a management fee of 0.5% of assets, which is quite small. Remember though that all ETFs carry the disadvantage of a commissioning fee whenever a trade is made -- which eats away a sizable amount if you are planning to dollar-cost average by investing or selling several times a year.