Crude Oil in April - The ETF Edition
In this article I highlighted the fact that crude oil futures have made more money historically during the month of April than in any other month. While that knowledge can be useful, the reality is that a lot of investors will never - and probably should never - trade a crude oil futures contract.
So, in this piece we will look at the performance of an ETF substitute. As our proxy we will use ticker DBO (Invesco DB Oil Fund), which holds crude oil futures contracts 12 months out (which tend to be less volatile than those for the near - or spot - month) secured by various treasury and government securities as collateral.
The chart below displays the hypothetical cumulative % gain/loss achieved by buying and holding DBO ONLY during the month of April every year since it started trading in 2006.
The good news is that the equity curve generally works its way up and to the right. However, we can also see that despite being the best month overall for crude oil, it is by no means a "sure thing".
The table below displays year-by-year % + (-) for DBO in April
The table below summarizes the results for April.
As you can see, despite the fact that April is the "best" month for crude oil, the winning % for DBO since inception is only 57.1% (up 8 of 14 years). The "edge" comes from the fact that the average and median winning trade is twice as big as the average and median losing trade.
Summary
Do these results jump out as "must trade" numbers? That is in the eye of the beholder. Perhaps this information might be used in conjunction with some sort of confirming indicator or some trend-following method.
Still, the thing to remember is this: if you are looking for a better month during which to trade the long side of crude oil, you won't find one.