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| I know very little about it so take my advice for what it's worth (not much).
I do not think you can treat those ETNs (Exchange Traded Notes) like a true hedge (at least for tax purposes). There is no direct relationship between a share of that fund and the futures contract, so there is no number of gallons to compare it to since (I think) it's just dealing with frequent trades of nearby futures contracts.
Here's the full prospectus on the fund (details about what it actually trades are on page 15):
http://www.unitedstatescommodityfunds.com/documents/pdfs/unitedstat...
Basically, if the price of diesel shoots up before you buy fuel, you'll still have to pay 15% capital gains tax on anything you make on that ETN trade. Still, though, I suppose it's simple way to get some protection on a small scale.
Look at the multi-year chart of that ETN vs the ULSD chart to get an idea of how they've been related so far:
http://www.barchart.com/chart.php?sym=HOY00&t=BAR&size=M&v=0&g=1&p=...
https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=max...
Another option would be to buy the UWTI ETN which is leveraged (3 times long) on the crude oil price. You wouldn't need to hold nearly as many shares of that to cover a swing back up in fuel costs, but with all ETNs you run the risk that they turn out to be worthless/untradeable, so I wouldn't risk much. | |
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I got a question on energy
