The United States Oil Fund (USO)

The United States Oil Fund (USO) is a domestic exchange traded security designed to track the movements of light, sweet crude oil (West Texas Intermediate). It was issued on April 10, 2006 by the United States Commodity Fund, designed to provide investment results corresponding to the daily changes of the spot price of WTI crude oil to be delivered to Cushing, Oklahoma. Although this fund invests its assets primarily in futures contracts (standardized contracts), it may invest in forward contracts (customized contracts) as well.

Investing in the USO is not the only you can join in the industry. A few alternatives to this are U.S. 12-Month Oil Fund (USL) or U.S. Natural Gas Fund (UNG). The USO is known to have higher fees than its alternatives, and so it is not a favorable choice for investors.

You might wonder how good USO is doing.

The graph shows USO performance comparing to the Crude Oil by their prices. The USO actually kept up for the first few years, but failed to appear as promising as the Crude Oil starting from 2009. Crude Oil price increased incredibly in 2009, and stayed high until 2014, but we cannot see the same thing from USO. The Price Correlation Coefficient of these two is only 0.627914464, and their Return Correlation Coefficient is 0.030781845, meaning there is not enough a significant relationship between them.  This leads to the conclusion that the USO is not tracking well with Crude Oil, especially during the time when the industry is most promising.

In conclusion, I reccomend not investing in the USO. The fund never seems to have beaten its own industry market, and statistical results show that it is still going downhill. You should look into other alternatives if you consider investing in the energy industry.

Link to the data can be found here.

Under Armour

Under Armour (UAA) is a rather new name in footwear, sports and casual apparel. Founded in 1996 by Kevin Plank, Under Armour quickly rose to become one of U.S biggest sport brands, along with Nike and Adidas.

However, at the end of January this year, UAA had a cliff-like drop of 50%, from $40 to $20 which frightened investors and put the company to doubt as whether it would recover or would go bankrupt in the near future. The biggest reason for this came from the news that UAA's CFO Chip Molloy left the company for "personal reasons", and the market clearly punished UAA price for the possibility of the company having fraud. However, there are more reasons that can explain the situation. The brand right now lacks some potential or famous sport athletes that boost up their sales. With the decrease in sales, renting costs have been overwhelmed and as the result the company showed bad financial results. These reasons are worth explaining the situation, yet in my opinion, they do not appear critical enough to drive a company to bankruptcy. The company can overcome the situation by successfully hiring a talented CFO and changing its marketing strategy to include more well known sport stars.

With this opinion in mind, I think about "Charlie and Jamie" kind of investment. From the list, the lowest strike price for a call option with the lowest cost per option is the $45 Call with the cost of $0.40. If UAA price recovers to $40 in 100 days, then we have the following calculations:

The option is likely to cost $9.68 by then, and at that time the rate of return will be 24.2 times! For example, if you invested 100,000 options for $40,000 you would receive $968,000. Easy way to make a million isn't it? And if the outcome is not as expected, you can just walk away from the deal, and lose the money you put in for the options, which in this case is $40,000. Even if you are not that adventurous, I still recommend you this investment, as the 24.2 times of return is always worth trying.