Get a Grip on Two Sliding Oil Proxies

Ooh, I almost forgot. If oil goes up or down 85% from the price it held when the Macroshares were listed and stays there for three days in a row, both funds terminate. That's not terribly likely, but it's worth being aware of.

While this may seem complex, and it sure does to me, Claymore is far from an island in terms of pursuing this structure. I was told by a representative from another ETF provider that it was also exploring products with a similar structure. He said that Claymore is simply first to market. Clearly, Claymore is taking a risk with this because, good or bad, if it can't get the message out as to what this really is, it's not likely to be successful.

My initial reaction is that there is more utility in the down shares as a hedge against the energy portion of a diversified portfolio. Buying Oil Down is certainly simpler than going short something else, and for some people it's easier than buying put options.

Oil Up may turn out to be a better proxy for oil than the U.S. Oil Fund(USO Quote) ETF or the iPath Goldman Sachs Crude Oil Tracking Index ETN(OIL Quote), but for now it's too early to know.

If you are inclined to invest in oil through a commodity ETF, it behooves you to at least learn about Oil Up and Oil Down so you can make an informed decision about the best product for your portfolio.

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Please note that due to factors including low market capitalization and/or insufficient public float, we consider Macroshares Oil Up and Oil Down to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.