Oil Macros Really Max Out

By Matthew Hougan

The Macro's, of course, are the unusual oil ETFs that are issued in pairs and whose values are tied to one another. There is an "Up" oil fund (UCR) and a "Down" oil fund (DCR), and they work like a teeter-totter tied to the price of oil. When the price of oil rises (or falls), assets move from UCR to DCR (or vice-versa).

The funds launched when oil was $60/barrel. Yesterday, oil pierced $120/barrel, up 100% from when the Macro's debut.

A teeter-totter can oil go so high or so low, and the doubling means that the Macro's have maxed out. At the close of trading on Monday, May 5, the net asset value of DCR was $0.01/share. I can only assume that one penny is par value.

Conversely, the net asset value of UCR is $39.99/share, as close to its $40/share max as you can get.

The funds have already hit their "termination trigger," the price at which they would be shut down and shareholders would receive payouts based on the fund's net asset value. The last day of trading is scheduled for June 30.

Interestingly, though,the funds continue to trade nowhere near their NAV. DCR closed the day at $3.12/share, while UCR ended at $37.00. There are various arguments about whey the funds at trading at such share discrepancies to NAV, including that DCR is trading as a virtual put on oil.

Either way, it sure is interesting.