losses would decrease not increase basis. also realize that USO generates its income from trading futures contracts which are regulated futures contracts so the gain/loss from them is 60% long term capital gain/loss and 40% short term capital gain/loss. there could be other types of income and expenses. your basis goes up for net income and down for losses and distributions. At the end of the day market value is determined by adjusting assets and liabilities to the end of the day fair market value (this is the process followed bu all funds).
here's a brief synopsis of the fund
Fund Strategy
The investment seeks the daily changes in percentage terms of its shares’ per share net asset value (“NAVâ€) to reflect the daily changes in percentage terms of the spot price of light, sweet crude oil delivered to Cushing, Oklahoma, as measured by the daily changes in the price of a specified short-term futures contract on light, sweet crude oil called the “Benchmark Oil Futures Contract,†less USO’s expenses. USO seeks to achieve its investment objective by investing primarily in futures contracts for light, sweet crude oil, other types of crude oil, diesel-heating oil, gasoline, natural gas, and other petroleum-based fuels.
Additional Information
Risks of Commodity ETFs
Commodity-related products, including futures, carry a high level of risk and are not suitable for all investors. Commodity-related products may be extremely volatile, illiquid and can be significantly affected by underlying commodity prices, world events, import controls, worldwide competition, government regulations, and economic conditions, regardless of the length of time shares are held. Investments in commodity-related products may subject the fund to significantly greater volatility than investments in traditional securities and involve substantial risks, including risk of loss of a significant portion of their principal value.
