Episode summary
An ETF for a Wild Oil Market | Trillions
Trillions
· · Hosts: Joel Weber, Eric Balchunas · Guests: Andre Yapp
Summary
The episode centers on USE, the USCF Energy Commodity Strategy Absolute Return Fund, as an alternative way to trade oil and broader energy markets. The hosts argue that while USO remains the best-known oil ETF, USE is more dynamic because it can go long, short, or use spreads across WTI, Brent, natural gas, gasoline, diesel, and gas oil. That flexibility is presented as a way to handle a volatile market shaped by headlines around Iran, Trump, and shifting oil prices.
Andre Yapp says the fund is meant to be active and opportunistic, but he also notes that the name “absolute return” may overpromise. His analysis finds that USE has delivered positive returns in both up and down market regimes, which suggests it still behaves with a lot of oil beta rather than true market-neutral protection. The hosts frame that as useful but not magical: it may be a less volatile, more flexible oil vehicle than USO, but it still carries futures risk.
A major selling point is taxes. Unlike USO, USE is structured in a way that avoids the K-1 form and ties tax liability more directly to the investor’s own activity. The hosts present that as a practical advantage for retail investors who want exposure to oil without some of the usual paperwork headaches.
Key takeaways
- Andre Yapp says USE is actively managed and can go long, short, or use spreads across multiple energy futures, not just crude.
- The hosts say USE may be a somewhat safer, less volatile alternative to USO, but it still lives in the risky world of commodity futures.
- Andre Yapp says the fund’s “absolute return” label is a stretch because its returns still look positively correlated with the energy market.
- The hosts highlight that USE avoids the K-1 tax form, which is a meaningful convenience advantage over USO.
- Eric Balchunas says futures-based oil ETFs are still “red-light products” because roll costs and market structure can punish investors.
Notable quotes
“It's saying, "I'm giving you a return whether the markets are going up or down because of my ability to go long or short”
“it's an actively managed ETF that utilizes long, short, or spread positions in futures contracts tied with energy commodities”
“The same risk exists with US, however, the strategy is more dynamic because it has the capacity to go long, to go short, as well as take spread positions”
“USE is structured a little differently than USO and I just want to take a moment to talk about that cuz it is Andre an open-ended investment company”
How the episode opens
Bloomberg Audio Studios. Podcasts, radio, news. — That's the thing that I find a little bit jarring. So, when you hear absolute, you think of a positive number. You basically think of something going up. It's saying, "I'm giving you a return whether the markets are going up or down because of my ability to go long or short."
Welcome to Trillions. I'm Joe Weisenthal. — And I'm Eric Balchunas. It's hard not to talk about oil this year. It's just been a theme. But, I was surprised for this episode to learn about an ETF other than the United States Oil Fund, USO,
Which is just the big dog in oil. And it's the one that we usually talk about when we talk about oil. But, this other ETF is is pretty dynamic, seeing flows, and it has some aspects that normal investors might want to know about.
And I can say this for the first time ever, you could actually like maybe think about being a retail investor who touches oil. It still holds futures, which is just the nature of a commodity ETF. But, you won't get a surprise come tax season, either.
This time on Trillions, a new oil trade. Every time we talk about oil, we talk about a a certain ETF, which is the United States Oil Fund. The ticker for that is USO.
And your research has surfaced a new one. Which Which is it?
Yeah, right. So, USO is the famous one. It holds futures very close to what we call front month.
So, it's very sensitive, but has some other issues, which we'll discuss. But, it's by far the most popular. Uh but, there's another one that is just maybe a little more uh risk-averse and a little safer for people than USO, uh called use, which is USC, which is the word for I want to use something or the plural word for um you in Philly, use guys.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- oil etfs
- iran tensions
- absolute return
- oil futures risk
- k-1 taxes
Companies and tickers mentioned
- USO
- United States Oil Fund
- USCF Energy Commodity Strategy Absolute Return Fund
Watch the episode
Watch “An ETF for a Wild Oil Market | Trillions” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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