Credit Suisse X-Links Crude Oil Shares Covered Call ETNsNASDAQ: USOI

The USOI ETN uses a covered call strategy on USO ETF, offering high monthly distributions. However, investors are cautioned as the USOI/USO ETF has significant tracking errors relative to oil commodities. Currently, the futures curve is in backwardation, which generates a positive 'roll-yield' for USOI/USO. Looking forward, oil is at a crossroads as bullish and bearish fundamentals fight to exert dominance on oil prices.

We had a bull rating on Credit Suisse X-Links Crude Oil Shares Covered Call ETNs, the covered call fund for crude oil futures. The bullish factors played out, and the fund has outperformed even the S&P 500. We look at how those factors are in play today and update our thesis.

Goldman predicts crude oil prices may reach a peak of $87 by mid-year while technicals on WTI appear more constructive today. USOI offers investors exposure to a covered call investment strategy on crude oil - the ETN generally benefits from neutral to slightly rising oil prices. USOI and oil prices appear poised for more gains after the prompt month of WTI touched $80 last week.

Crude oil volatility remains elevated, providing an opportunity for higher yields on the Credit Suisse X-Links Crude Oil Shares Covered Call ETNs. USOI, which implements a covered call investment strategy on the USO oil fund, is now considered viable for energy investors seeking high-income yield following uncertainty last spring. USOI has outperformed the USO oil ETF in 2023, and its monthly distributions are influenced by the level of implied volatility in the oil market.

Credit Suisse offers unique Crude Oil ETNs with a covered call investment strategy, providing monthly cash flow in exchange for giving up gains beyond the strike price. The current setup is probably one of the most attractive ones that we have seen in some time. We give you 4 reasons why the total returns are likely to be attractive from here and also go over the major risk factor.

The Credit Suisse X-Links Crude Oil Shares Covered Call ETNs is an exchange-traded note from Credit Suisse (now UBS). The ETN follows an index that aims to profit by writing one-month 6% out-of-the-money covered calls on the United States Oil Fund, LP ETF. USOI, therefore, represents both a take on oil prices as well as oil price volatility.

Credit Suisse X-Links Crude Oil Shares Covered Call ETNs offers high dividend yields but has negative total returns. USOI writes covered calls against an ETF, USO, that holds oil futures contracts, resulting in NAV decay. The fund's high expense ratio and lack of trading opportunities make it unsuitable for investors in my view.

Investors are clamoring for ultra-high yield ETFs, causing some to look toward alternative products like crude oil futures call option selling. USOI is among the highest-yielding ETFs at a 37% dividend yield today, but its true expected return is much lower due to "contango decay" risks and capped appreciation.