bigjom
How a thing is constructed gives us a good guide as to its use. It is possible to live in a grain silo, and it's possible to store wheat in a house. But the designs do make it easier - and more sensible - to
SCO: Perfectly Sensible Speculative Tool, But Not A Hold
Summary
- SCO is designed as a short-term, speculative tool for betting against WTI crude oil futures, not for long-term holding or investment.
- The fund’s construction—using futures and daily leverage resets—causes performance decay and divergence from its benchmark over time.
- Liquidity, tight spreads, and low costs make SCO suitable for active traders seeking leveraged exposure to short-term oil price declines.
- Long-term investors should avoid SCO, as its structure inherently erodes value; it’s best used for tactical trades or hedging, not buy-and-hold strategies.
Tim Worstall is a wholesaler of rare earth metals and one of the global experts in the metal scandium. He is also a Fellow at the Adam Smith Inst in London and an writer for a number of media outlets, including The Times (London), Telegraph, The Register and even, very occasionally indeed, for the WSJ. This account is linked with that of Mohamad Machine-Chian: https://seekingalpha.com/user/52914142/comments
Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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