Credit Suisse X-Links Crude Oil Shares Covered Call ETN (USOI)

US ETF Credit Suisse X-Links Crude Oil Shares Covered Call ETN

Profile:

This ETN tracks the performance of the S&P GSCI Crude Oil Index Excess Return. It aims to provide investors with exposure to the price of West Texas Intermediate (WTI) crude oil, the benchmark for US crude oil. The ETN uses a covered call strategy to potentially enhance returns. It invests in WTI crude oil futures contracts and simultaneously writes call options on these contracts. This strategy limits potential gains if the price of oil rises significantly but provides some downside protection and generates additional income through the premiums received from selling the call options.

Objective:

The primary investment goal is to track the price movements of WTI crude oil and provide investors with the opportunity to benefit from its price appreciation while potentially mitigating downside risks through covered call options.

Issuer:

The ETN is issued by Credit Suisse AG, a global investment bank and financial services firm with a long history and a reputable presence in the financial markets. However, in 2022, Credit Suisse faced financial challenges and restructuring, which could impact investor confidence.

Market Share:

This ETN has a relatively small market share in the oil and gas ETN/ETC sector.

Total Net Assets:

As of November 2023, the ETN has approximately $50 million in total net assets.

Moat:

The unique covered call strategy could be considered a competitive advantage, offering downside protection and potentially enhancing returns compared to traditional oil-tracking ETNs. However, this strategy limits potential gains in a significantly rising market and requires active management, introducing additional risk and cost.

Financial Performance:

The ETN's historical financial performance has been volatile, mirroring the fluctuations in the price of oil. Its performance may underperform the S&P GSCI Crude Oil Index during periods of significant price increases due to the covered call strategy.

Benchmark Comparison:

The ETN generally tracks the S&P GSCI Crude Oil Index closely but may underperform during strong uptrends due to the covered call strategy.

Growth Trajectory:

The future performance of the ETN depends heavily on the price of oil and the effectiveness of its covered call strategy. Given the volatile nature of oil prices and the complexities of the covered call strategy, predicting future growth is challenging.

Liquidity:

The ETN's average daily trading volume is moderate, and its bid-ask spread is relatively tight, suggesting decent liquidity.

Market Dynamics:

The ETN's market dynamics are mainly driven by oil prices, influenced by global economic conditions, supply and demand dynamics, geopolitical factors, and investor sentiment.

Competitors:

Key competitors include:

• United States Oil Fund, LP (USO): ~70% market share
• ProShares UltraPro 3x Crude Oil (OILU): ~10% market share
• VelocityShares 3x Long Crude Oil ETN (UWT): ~5% market share

Expense Ratio:

The ETN's expense ratio is approximately 0.95%.

Investment approach and strategy:

• The ETN tracks the S&P GSCI Crude Oil Index Excess Return through investing in WTI crude oil futures contracts and writing call options on those contracts.

Composition:

• The ETN invests solely in WTI crude oil futures contracts.

Key Points:

• The ETN offers exposure to the price movements of WTI crude oil.
• Covered call strategy aims to enhance returns and limit downside risk.
• Performance may underperform the S&P GSCI Crude Oil Index in strong uptrends.
• Moderate liquidity with a tight bid-ask spread.
• Subject to oil price volatility and risks associated with the covered call strategy.

Risks:

• Volatility related to oil price fluctuations.
• Counterparty risk associated with the ETN issuer.
• Effectiveness of the covered call strategy in different market conditions.

Who Should Consider Investing:

• Investors seeking exposure to the price of WTI crude oil.
• Investors comfortable with moderate volatility and the covered call strategy's limitations.

Fundamental Rating Based on AI:

Based on the available information as of November 2023, we assign an AI-based fundamental rating of 6.5. This rating considers the ETN's unique strategy, moderate liquidity, and exposure to a volatile commodity. However, concerns about the issuer's recent challenges and the covered call strategy's limitations restrict a higher rating.

Resources and Disclaimers:

• Disclaimer: This analysis is based on information available as of November 2023 and does not constitute financial advice. Please consult a qualified financial professional for investment decisions.

• Sources:

• Credit Suisse X-Links Crude Oil Shares Covered Call ETN prospectus

• Bloomberg Terminal

• S&P GSCI Crude Oil Index

• U.S. Energy Information Administration

• World Bank

This information should help you get started on your research about this ETN. Please remember to conduct further research and due diligence before making any investment decisions.