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FAIR VALUE OF FINANCIAL INSTRUMENTS
 3 Months Ended
Mar. 31, 2013
Fair Value Disclosures [Abstract]  
FAIR VALUE OF FINANCIAL INSTRUMENTS

NOTE 7 – FAIR VALUE OF FINANCIAL INSTRUMENTS

 

USBO values its investments in accordance with Accounting Standards Codification 820 – Fair Value Measurements and Disclosures (“ASC 820”).  ASC 820 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurement.  The changes to past practice resulting from the application of ASC 820 relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurement.  ASC 820 establishes a fair value hierarchy that distinguishes between: (1) market participant assumptions developed based on market data obtained from sources independent of USBO (observable inputs) and (2) USBO’s own assumptions about market participant assumptions developed based on the best information available under the circumstances (unobservable inputs).  The three levels defined by the ASC 820 hierarchy are as follows:

 

Level I – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

 

Level II – Inputs other than quoted prices included within Level I that are observable for the asset or liability, either directly or indirectly.  Level II assets include the following: quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market-corroborated inputs).

 

Level III – Unobservable pricing input at the measurement date for the asset or liability. Unobservable inputs shall be used to measure fair value to the extent that observable inputs are not available.

 

In some instances, the inputs used to measure fair value might fall within different levels of the fair value hierarchy. The level in the fair value hierarchy within which the fair value measurement in its entirety falls shall be determined based on the lowest input level that is significant to the fair value measurement in its entirety.

 

The following table summarizes the valuation of USBO’s securities at March 31, 2013 using the fair value hierarchy:

 

At March 31, 2013 Total  Level I  Level II  Level III 
Short-Term Investments $27,715,581  $27,715,581  $—  $— 
Exchange-Traded Futures Contracts                
Foreign Contracts  77,060   77,060   —   — 

 

During the three months ended March 31, 2013, there were no transfers between Level I and Level II.

 

The following table summarizes the valuation of USBO’s securities at December 31, 2012 using the fair value hierarchy: 

 

At December 31, 2012 Total  Level I  Level II  Level III 
Short-Term Investments $40,715,676  $40,715,676  $—  $— 
Exchange-Traded Futures Contracts                
Foreign Contracts  739,330   739,330   —   — 

 

During the year ended December 31, 2012, there were no transfers between Level I and Level II.

 

USBO has adopted the provisions of Accounting Standards Codification 815 – Derivatives and Hedging, which require presentation of qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts and gains and losses on derivatives.

 

Fair Value of Derivative Instruments

 

Derivatives not
Accounted for as
Hedging Instruments		 Condensed Statements
of Financial Condition
Location		 Fair Value
At March 31, 2013		  Fair Value
At December 31, 2012		 
Futures - Commodity Contracts Assets $77,060  $739,330 

 

The Effect of Derivative Instruments on the Condensed Statements of Operations

 

    For the three months ended
March 31, 2013		  For the three months ended
March 31, 2012		 
Derivatives not
Accounted for as
Hedging
Instruments		 Location of Gain
or (Loss)
on Derivatives
Recognized in
Income		 Realized
Gain or (Loss) on
Derivatives
Recognized
in Income		  Change in
Unrealized
Gain or (Loss)
on Derivatives
Recognized in
Income		  Realized
Gain or (Loss) on
Derivatives
Recognized
in Income		  Change in
Unrealized
Gain or (Loss)
on Derivatives
Recognized in
Income		 
Futures – Commodity Contracts Realized gain on closed positions $1,440,840      $6,361,470     
                   
  Change in unrealized gain (loss) on open positions     $(662,270)     $1,154,200