United States 12 Month Oil (USL) Covered Calls

United States 12 Month Oil Fund, LP is an exchange-traded security that tracks the price of West Texas Intermediate (WTI) light, sweet crude oil. Unlike funds that only hold front-month contracts, USL invests in near-month futures contracts for the next 12 consecutive months. This strategy is designed to reduce the impact of contango and provides a more stable long-term reflection of oil price movements for investors seeking commodity exposure without physical storage.

You can sell covered calls on United States 12 Month Oil to lower risk and earn monthly income. Born To Sell's covered call screener gives you customized search capabilities across all possible covered calls but here are a couple of examples for USL (prices last updated Fri 4:16 PM ET):

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United States 12 Month Oil Fund (USL) is a specialized commodity pool designed to provide investors with a more stable way to gain exposure to the crude oil market. While many oil-linked ETFs focus solely on the nearest ("front-month") futures contract, this fund distributes its holdings equally across the next 12 months of futures contracts. This multi-month laddering strategy aims to minimize the negative effects of "contango," a market condition where future oil prices are higher than spot prices, causing traditional funds to lose value during the monthly rolling process.

The fund acts as a proxy for the price of West Texas Intermediate (WTI) light, sweet crude oil. By holding a basket of contracts further out on the futures curve, the fund typically exhibits lower volatility and a lower turnover rate than its front-month counterparts. This makes it a preferred vehicle for investors who want to express a medium-to-long-term view on energy prices rather than engaging in short-term day trading. The fund is structured as a limited partnership and provides daily transparency into its underlying derivative positions.

Investment Objective and Curve Management

The primary goal of the fund is for the daily changes in percentage terms of its unit price to reflect the daily changes in the price of WTI crude oil. To achieve this, the fund invests in listed crude oil futures contracts and other oil-related interests. As each near-month contract approaches expiration, the fund "rolls" that specific portion of the portfolio into a new contract 12 months away. This continuous laddering ensures the fund maintains a constant one-year forward duration, providing a smoother performance profile during periods of shifting commodity supply and demand.

Competitive Landscape

The fund competes with other oil-linked ETFs and the equities of major petroleum producers. Key competitors and related optionable securities include:

1. United States Oil Fund LP: The most liquid front-month oil ETF and the primary benchmark for the "roll yield" comparison with USL.
2. Energy Select Sector SPDR Fund: The standard equity-based energy benchmark, representing companies that produce the oil USL tracks.
3. Invesco DB Oil Fund: A competitor that uses an "optimum yield" strategy to select futures contracts based on the shape of the curve.
4. ProShares Ultra Bloomberg Crude Oil: A leveraged 2x long competitor for traders seeking magnified daily returns in the oil sector.
5. SPDR S&P Oil & Gas Exploration & Production ETF: A liquid sector competitor consisting of the companies most sensitive to long-term oil price trends.

Strategic Outlook and Economic Relevance

The strategic utility of the fund is closely tied to global energy cycles and the structural health of the futures market. In a "backwardated" market, where future prices are lower than spot prices, the fund’s laddered approach can provide a significant performance advantage. As the global economy navigates the transition to alternative energy, the price of crude oil remains a vital indicator of industrial activity and transportation demand. The fund provides a regulated and liquid way for investors to capture this "macro" trade without the complexities of managing a private futures account.

Management focuses on maintaining high liquidity and minimizing the tracking error between the fund's net asset value and the underlying futures benchmark. While the fund is subject to the unique risks of the commodity markets, including regulatory changes and geopolitical shocks, its structural design offers a more conservative approach to oil investing than pure front-month vehicles. For diversified portfolios, the fund serves as a hedge against inflation and a tool for broad-based commodity allocation.

Want more examples? USIG Covered Calls | USLM Covered Calls