It’s been a wild ride for Oil based ETFs over the last few months,especially for the MacroShares Oil Down ETF (DCR), which rises in price whenthe price of oil drops. Needless to say, DCR has been severely punished as oilprices have now cleared 0. On April 17th MacroShares issued a press release asfollows: “The NYMEX light sweet crude oil futures contract for June closed at4.36 on Wednesday, April 16th at 2:30. This marked the third consecutivebusiness day that the reference price for MacroShares Oil Up and Down (UCR andDCR respectively) closed at or above 1. This triggered an early terminationevent for the securities. On July 3rd, a final distribution payment will bemade to the UCR and DCR shareholders of record as of June 30th based on theunderlying value of the Up and Down MacroShares Trusts. The underlying value ofthe trusts will be determined based on the June 25th closing price of the NYMEXlight sweet crude oil futures contract for August.”

So what does this mean for investors of DCR? Basically Oil needs to dropbelow 0 for DCR to have any value for the distribution. The value for theshares will be based on the following forumla: (0 – Crude) / 3 = NAV

So if you’re looking for a more conservative short play on crude oil, andwith a longer timeframe than a few weeks, pass on DCR and look to shorting orbuying puts on the USO instead.

Stewart H. Welch, Founder of the Welch Group LLC, appearing on Fox News GoodDay Alabama. Stewart explains what ETFs, or Exchange Traded Funds are. Thereare several advantages of using ETF’s and Stewart does a good job of explainingthem in this video. To find out more visit Stewart’s website atwww.GetRichOnPurpose.com Video Rating: 5 / 5

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