Commodity Etf


Why don’t ETFs track their subjects perfectly?

Today, USO and OIL (both crude etfs) have gone down roughly 2%, yet oil prices have risen more than $3 (10%). What is the reason for this rather large discrepancy when the ETF is supposed to track the commodity?

Since ETFs trade separately traded from their underlying assets, there is always going to be a different. In the case of index stock baskets (eg QQQQ) there will never be a difference of more than a cent because otherwise someone could buy the ETF and sell the underlying stock and make free money (arbitrage).

However, with underlying commodities, this is harder to to – There will be changes in the underlying, but they will be corrected over time (the following day) when ETFs are either created or redeemed.

Commodity ETF