$3.6bn crude bet puts price on stupidity

I think you do not understand things... Yes, clearly you enter each contract on their own and end results is a matter of difference between the opening price and closing price. I mean come on, no one is debating this. Did you even read my post? Example 1 and example 2? Crude oil doubled in both cases in 6 months, in example 1 you made 0$ and in example 2 you made 130% return. How is this not a factor? Are you so blind in your explanations as not to see this?
The same is not true for gold for example. You have spot price. If you look at the chart and price doubled in 6 months, there is no way you could have end result where you made 0$..

Again yes, you open one contract and close it, and do the same with the other. But what I and 10 posters before me were trying to explain is that you cannot invest directly in SPOT price as you can with stocks, bonds, gold. And this is what most people are used to. To check the spot price of something, and trying to see if it is relatively cheap or expencive and if they should buy.

I mean just look at arround 100 posts already opened here on ET. Oil is 15$ I know it will not stay this long, I think price is heading to 30 in a year, how can I make 100% return. YOU CANNOT! This is why steep contango is such huge headwind. Yes oil is 15$ now. Yes oil will be 30$ in 1 year. AND THERE IS NO WAY TO TAKE ADVANTAGE OF THAT! Not the mechanics of rolling each contract and debating that you enter at 10 and then sell at 8 and enter new one at 12 and sell it at 25.. People just see spot price now which is cheap and want to make it big when oil eventually goes back to 30$, 35$, 40$. But the problem is futures far out in time already trade at those prices. And if it were not for such steep contango, futures would trade at 15, 16, 17, 18 out in time not a jump of 5$.. And so in this case YOU COULD make money buying at 18 december contract and selling it at 30... Why is this so hard for you to understand? Also if you want to see how much contango affects returns, just look at the history. Oil went do 80%, people bought at the bottom. Then oil rebounded 100% in a few months and becuase of contango they realized 35 % return. And contango was not even that steep as it is now. As I showed you oil can now rebound 100% in a year, which I am sure it will, and your are expect to make a big fat 0! Because june 2021 is already at 30... But please dont bring now the argument yes but spot can also end at 35 or you can short oil or you can spread trade it or you can go with CFD.. None of this is relevant. What is relevant is that steep contango make it very hard to make money INVESTING in oil. Yes you can day trade oil and buy bottoms and sell tops and make 20$ daily with huge ups and down and this all does not matter.
What we are trying to show to all those looking to INVEST in oil now at that rock bottom prices with intention to sell oil when price is back to 30$ and expect to double their money. Aint gonna happen. The only way you can make money investing in oil directly not talking about stocks here either, is for oil to raise faster than what is currently implied in futures curve. So if oil in 1 year is 40$ instead of 30$ where those futures is trading now, you can make 30% return... USO is a clear example while oil investing is not easy and why contango eats away returns month after month.. But again, most investors just open up oil chart for 20 years and see of look, you could have bought oil at 25 and sell it a year later for 75 as it happened not so long ago, and made 300% return. Good luch with that. My last post on that topic, if you cannot see how steep contango eats away returns compared to spot prices, then no one can help you.. And believe me, people just put CL on TOS or IB and check graph and see SPOT return, not what they could actually buy at the time and what futures curve looked like. As this is much different than what most are used to when they buy stocks, check bonds or gold performance etc. That is where you do realize returns as they are on the graph. But not on CL..
 
FrankInLa said:
You can't make money by shorting a futures contract? And you still don't understand that pnl is NOT calculated across different contracts. You enter one contract month and exit the same contract month. Then you enter into the next contract month. That is how traders roll a futures position. Via manual roll or trading the spread.

Here is a simple example (I just work with direct futures prices, not notional for clarity sake)

May contract:
price when entering : 20
Price when exiting : 15

June contract:
Price when entering : 18
Price when exiting : 25

You paid 20 dollars to enter a long in May contract. Then close to expiration you flatten the position and receive 15 dollars. A loss of 5 dollars. Then you open a June contract at 18 dollars on the same day you sold the May contract. At close to expiration of the June contract you receive 25 dollars. A gain of 7 dollars and an overall profit of 2 dollars.

Same example with a calendar spread:

Buy at 20, roll by paying 3, at end receive 25. Net pnl is 2 dollars.

Nowhere does the spread between May and June contracts enter into pnl.

Why can people still not understand basic futures 101 accounting? Contango at no point entered into pnl. You could as well have shorted the future with different pnl implications and still neither the spread nor contango factored into pnl whatsoever. Nothing dictates that a futures price must decrease over a certain holding period when the curve is in contango.

I hope this example clarified once and for all this misunderstanding.
More...

Just as when you accused me of not understanding, there is nothing in the post that you quoted that indicates the poster does not understand futures accounting 101. He is illustrating why it is hard to make money being long while the curve remains in supercontango.

Just because the spread between the contracts does not appear as a term in your PnL computation doesn't mean that it's irrelevant. The large spread shows the strength of the contango, which is obviously relevant to the whole trade.

"Nothing dictates that a futures price must decrease over a certain holding period when the curve is in contango" Show me where anyone claimed that contango dictates this with absolute certainty. In finance most things are not absolutely certain, so this is a completely uninteresting point. Do you dispute that going long an asset with an extremely negative carry will tend to lose money more often than not? You need to have amazing timing ability to buy it just when the returns are high enough to overcome the carry.
 
You are extremely confused pal. You can short oil futures. Ever heard of that? You short at 15 get out at 8. You made 7k. If you started with 3.5k you just doubled your money, 100% return. What is wrong with you people? Your fucking contango does not dictate at all whether the price of a futures contract within the lifetime of the future goes up or down. Supply and demand of spot does and to a much more minor degree interest rates, storage, transportation and other factors. Price of spot oil can move up 150% Monday morning and so would be the near expiry and to a lesser degree the further out ones. Your contango story would be history within hours. And why?

Because contango and backwardation are nothing other than an expression of the expectation of future price levels. Contango does not dictate where the near month expiry heads to, Spot prices do. Contango also does not force any of the further out months into any direction, spot prices do and changes in expectations in future spot prices do.

Tomaz26 said:
I think you do not understand things... Yes, clearly you enter each contract on their own and end results is a matter of difference between the opening price and closing price. I mean come on, no one is debating this. Did you even read my post? Example 1 and example 2? Crude oil doubled in both cases in 6 months, in example 1 you made 0$ and in example 2 you made 130% return. How is this not a factor? Are you so blind in your explanations as not to see this?
The same is not true for gold for example. You have spot price. If you look at the chart and price doubled in 6 months, there is no way you could have end result where you made 0$..

Again yes, you open one contract and close it, and do the same with the other. But what I and 10 posters before me were trying to explain is that you cannot invest directly in SPOT price as you can with stocks, bonds, gold. And this is what most people are used to. To check the spot price of something, and trying to see if it is relatively cheap or expencive and if they should buy.

I mean just look at arround 100 posts already opened here on ET. Oil is 15$ I know it will not stay this long, I think price is heading to 30 in a year, how can I make 100% return. YOU CANNOT! This is why steep contango is such huge headwind. Yes oil is 15$ now. Yes oil will be 30$ in 1 year. AND THERE IS NO WAY TO TAKE ADVANTAGE OF THAT! Not the mechanics of rolling each contract and debating that you enter at 10 and then sell at 8 and enter new one at 12 and sell it at 25.. People just see spot price now which is cheap and want to make it big when oil eventually goes back to 30$, 35$, 40$. But the problem is futures far out in time already trade at those prices. And if it were not for such steep contango, futures would trade at 15, 16, 17, 18 out in time not a jump of 5$.. And so in this case YOU COULD make money buying at 18 december contract and selling it at 30... Why is this so hard for you to understand? Also if you want to see how much contango affects returns, just look at the history. Oil went do 80%, people bought at the bottom. Then oil rebounded 100% in a few months and becuase of contango they realized 35 % return. And contango was not even that steep as it is now. As I showed you oil can now rebound 100% in a year, which I am sure it will, and your are expect to make a big fat 0! Because june 2021 is already at 30... But please dont bring now the argument yes but spot can also end at 35 or you can short oil or you can spread trade it or you can go with CFD.. None of this is relevant. What is relevant is that steep contango make it very hard to make money INVESTING in oil. Yes you can day trade oil and buy bottoms and sell tops and make 20$ daily with huge ups and down and this all does not matter.
What we are trying to show to all those looking to INVEST in oil now at that rock bottom prices with intention to sell oil when price is back to 30$ and expect to double their money. Aint gonna happen. The only way you can make money investing in oil directly not talking about stocks here either, is for oil to raise faster than what is currently implied in futures curve. So if oil in 1 year is 40$ instead of 30$ where those futures is trading now, you can make 30% return... USO is a clear example while oil investing is not easy and why contango eats away returns month after month.. But again, most investors just open up oil chart for 20 years and see of look, you could have bought oil at 25 and sell it a year later for 75 as it happened not so long ago, and made 300% return. Good luch with that. My last post on that topic, if you cannot see how steep contango eats away returns compared to spot prices, then no one can help you.. And believe me, people just put CL on TOS or IB and check graph and see SPOT return, not what they could actually buy at the time and what futures curve looked like. As this is much different than what most are used to when they buy stocks, check bonds or gold performance etc. That is where you do realize returns as they are on the graph. But not on CL..
More...
 
Last edited:
And please don't miss-characterize my point. My point in the 2nd post of this thread was crystal clear:

The article ran the statement:
"In an oil market characterised by a super contango, where futures prices are higher than near term prices, theUS Oil Fund is forced into monthly rollovers where it sells expiring contracts at a low – or negative – price and then buy futures at a higher price. That eats away at returns."

WRONG and I showed why. Has zero impact on returns.

What you talk about is how some dumbnuts think they can trade rising future spot prices via futures in contango. I never defended them. I argued that above citation from the article is wrong. USO was never ever designed to mimic spot oil price moves over longer holding periods.

Tomaz26 said:
I think you do not understand things... Yes, clearly you enter each contract on their own and end results is a matter of difference between the opening price and closing price. I mean come on, no one is debating this. Did you even read my post? Example 1 and example 2? Crude oil doubled in both cases in 6 months, in example 1 you made 0$ and in example 2 you made 130% return. How is this not a factor? Are you so blind in your explanations as not to see this?
The same is not true for gold for example. You have spot price. If you look at the chart and price doubled in 6 months, there is no way you could have end result where you made 0$..

Again yes, you open one contract and close it, and do the same with the other. But what I and 10 posters before me were trying to explain is that you cannot invest directly in SPOT price as you can with stocks, bonds, gold. And this is what most people are used to. To check the spot price of something, and trying to see if it is relatively cheap or expencive and if they should buy.

I mean just look at arround 100 posts already opened here on ET. Oil is 15$ I know it will not stay this long, I think price is heading to 30 in a year, how can I make 100% return. YOU CANNOT! This is why steep contango is such huge headwind. Yes oil is 15$ now. Yes oil will be 30$ in 1 year. AND THERE IS NO WAY TO TAKE ADVANTAGE OF THAT! Not the mechanics of rolling each contract and debating that you enter at 10 and then sell at 8 and enter new one at 12 and sell it at 25.. People just see spot price now which is cheap and want to make it big when oil eventually goes back to 30$, 35$, 40$. But the problem is futures far out in time already trade at those prices. And if it were not for such steep contango, futures would trade at 15, 16, 17, 18 out in time not a jump of 5$.. And so in this case YOU COULD make money buying at 18 december contract and selling it at 30... Why is this so hard for you to understand? Also if you want to see how much contango affects returns, just look at the history. Oil went do 80%, people bought at the bottom. Then oil rebounded 100% in a few months and becuase of contango they realized 35 % return. And contango was not even that steep as it is now. As I showed you oil can now rebound 100% in a year, which I am sure it will, and your are expect to make a big fat 0! Because june 2021 is already at 30... But please dont bring now the argument yes but spot can also end at 35 or you can short oil or you can spread trade it or you can go with CFD.. None of this is relevant. What is relevant is that steep contango make it very hard to make money INVESTING in oil. Yes you can day trade oil and buy bottoms and sell tops and make 20$ daily with huge ups and down and this all does not matter.
What we are trying to show to all those looking to INVEST in oil now at that rock bottom prices with intention to sell oil when price is back to 30$ and expect to double their money. Aint gonna happen. The only way you can make money investing in oil directly not talking about stocks here either, is for oil to raise faster than what is currently implied in futures curve. So if oil in 1 year is 40$ instead of 30$ where those futures is trading now, you can make 30% return... USO is a clear example while oil investing is not easy and why contango eats away returns month after month.. But again, most investors just open up oil chart for 20 years and see of look, you could have bought oil at 25 and sell it a year later for 75 as it happened not so long ago, and made 300% return. Good luch with that. My last post on that topic, if you cannot see how steep contango eats away returns compared to spot prices, then no one can help you.. And believe me, people just put CL on TOS or IB and check graph and see SPOT return, not what they could actually buy at the time and what futures curve looked like. As this is much different than what most are used to when they buy stocks, check bonds or gold performance etc. That is where you do realize returns as they are on the graph. But not on CL..
More...
 
Hahahaha you are so fucking stupid omg. Come on retard, just stop making fool of yourself What does shorting has to do with how contango affects returns when you want to capitulaze on "cheap" oil and making a bet that it will rise in the future? This is as stupid as saying, come on, you can go long soy bean if oil is in contango and make money there. it shors you have no fucking idea what you are talking about. All you do it trying to explain mechanics of a trade which no-one is interested in. Yes you an also go long bonds or short corn and make money, who the fuck cares. What we are debating is is how hard it is to make money in oil even if current prices are extremely low and we all know they will be higher down the road. This is all there is in this debate. Your moronic comments made our of thin air how you can buy at 18 and sell at 25 have nothing to do with this. Or if you are so smart then please explain to me and all others, how I can buy oil today at 15$ and sell it one year later at 30$ and make 100% return. Should be real easy for you as like you say rolls does not effect returns and so you should be really able to do it while sleeping. Can I wire you my money and you do that for me? Have you considered opening a hedge fund, since you are the only person in the world not affected by negative roll yield and you can easily make money with spot oil. Retard..

You are either 10 years old kid or just a proof some people are stupid beyond comprehension. Here arguing with 20 people here instead of seeing that something is wrong with you.
You remind me of that person, driving on the wrong side of the road when he hears news on radio: one idiot is driving on the wrong lane and he says:: one idiot? All of them!!

I mean really I would think this is a troll post if I would not see your previous posts and realizing you really are that stupid.. When you run out of arguments you start explaining how one can make money shorting as if that has anything to do with contango and the original theme, which was that some people would like to make money and 100 % return when price eventually goes from 15$ to 30$.. And as we explain to you this is not as easy because contango and futures curve structure is already going up steeply showing a steep price increase is already priced in. You have to overcome all this negative rolling yield if you want to invest in oil long term which means oil has to go up huge and you still make only 50 % or 30 % of that.. So again what exactly does that have to do with shorting? You can spread trade for sure, but then you have to guess the front month spot price correctly and where it will be in 30 days or 90 days etc.. This again has nothing to do with long term investment in oil and the FACT that current curve structure will eat away most of the positive spot price returns.. Man just STFU and go into your cave again.
 
cruisecontrol said:
110% troll. Clearly FrankInLa did not even read the post he quoted.
More...

110% troll? Try 200 % brainless retard :)

And yes, it shows he has his stupid argument in his mind and does not even read anything that is written. He will just repeat his stupid shit on and on again.. As if we are debating how one can make money on oil. He even introduced us to shorting. Good to know. I thought one can only go long futures. Really nice of him to show us we can now make money betting on prices increasing and falling. I should now be able to make doble the returns.. OMG.. And the moron is trying to argue how contango does not affect long term returns..
 
You completely miss the point. You were the one trying to argue my point but what you talk about never related to my point. I can only repeat USO Was never intended to be a spot price proxy over longer holding periods. Why are you even talking about that the entire time? I never claimed such nor hinted that trading futures in contango replicate the return profile of spot price. Why don't you bow out of the discussion if you don't even get my point? And if you are not interested in my point then why did you chat me up?

Tomaz26 said:
Hahahaha you are so fucking stupid omg. Come on retard, just stop making fool of yourself What does shorting has to do with how contango affects returns when you want to capitulaze on "cheap" oil and making a bet that it will rise in the future? This is as stupid as saying, come on, you can go long soy bean if oil is in contango and make money there. it shors you have no fucking idea what you are talking about. All you do it trying to explain mechanics of a trade which no-one is interested in. Yes you an also go long bonds or short corn and make money, who the fuck cares. What we are debating is is how hard it is to make money in oil even if current prices are extremely low and we all know they will be higher down the road. This is all there is in this debate. Your moronic comments made our of thin air how you can buy at 18 and sell at 25 have nothing to do with this. Or if you are so smart then please explain to me and all others, how I can buy oil today at 15$ and sell it one year later at 30$ and make 100% return. Should be real easy for you as like you say rolls does not effect returns and so you should be really able to do it while sleeping. Can I wire you my money and you do that for me? Have you considered opening a hedge fund, since you are the only person in the world not affected by negative roll yield and you can easily make money with spot oil. Retard..

You are either 10 years old kid or just a proof some people are stupid beyond comprehension. Here arguing with 20 people here instead of seeing that something is wrong with you.
You remind me of that person, driving on the wrong side of the road when he hears news on radio: one idiot is driving on the wrong lane and he says:: one idiot? All of them!!

I mean really I would think this is a troll post if I would not see your previous posts and realizing you really are that stupid.. When you run out of arguments you start explaining how one can make money shorting as if that has anything to do with contango and the original theme, which was that some people would like to make money and 100 % return when price eventually goes from 15$ to 30$.. And as we explain to you this is not as easy because contango and futures curve structure is already going up steeply showing a steep price increase is already priced in. You have to overcome all this negative rolling yield if you want to invest in oil long term which means oil has to go up huge and you still make only 50 % or 30 % of that.. So again what exactly does that have to do with shorting? You can spread trade for sure, but then you have to guess the front month spot price correctly and where it will be in 30 days or 90 days etc.. This again has nothing to do with long term investment in oil and the FACT that current curve structure will eat away most of the positive spot price returns.. Man just STFU and go into your cave again.
More...
 
FrankInLa said:
Incorrect. Many times in history has oil traded in backwardation. As recently as 1 year ago. All that while also costs of storage, shipping, and insurance was involved. Those impact pricing of futures but don't determine whether a commodity trades in contango or backwardation.
More...
I never said Oil ONLY trades in contango. But I did ask and you didn't reply whether you actually knew the cause for oil being in contango.
 
Do you know there are whole range of hedge funds that run trades solely on the contango / backwardation curve? Which does not exist in your world and does not affect anything. You should explain to them how they got it all wrong lol.. The premise is you go long futures in backwardation and short futures in contango to and expect positive results from carry. But hey, I guess they got it all wrong. Hope they see your post and stop running those strategies before its too late for them..
 
You must log in or register to reply here.
Back
Top