China!
http://news.ft.com/cms/s/14aa6a24-cdae-11da-afcd-0000779e2340.html
Then you have Iran giving Hammas 50 million and telling the U.S. to fuck off.
Gotta love it.
Crude bounce.....
- Thread starter patbateman
- Start date
China!
http://news.ft.com/cms/s/14aa6a24-cdae-11da-afcd-0000779e2340.html
Then you have Iran giving Hammas 50 million and telling the U.S. to fuck off.
Gotta love it.
I knew it. Traders would get fooled, especially equity traders, by the rollover to June contracts
.Look how big the spread is from May to June crude. June is currently trading $1.63 per barrel greater than May. Imagine if you went long crude oil here and kept rolling it over for the next year and the spread stayed the same. In between rollovers, the price of spot crude would have to rise $1.63 x 12 = $19.56 per barrel just for you to break even.
Or look at it another way, if you sold the front month crude contract and rolled it over every month, and a year from now the price of the front month contract was still $70.45, you would have made a 19.56/70.45 = 27.8% return on your money <i>even if you didn't use any leverage</i>.
Say you used leverage and sold 1 ICE WTI contract. The overnight maintenance margin requirement on this 1000 barrel contract is $4700. Plus you decide you want to have enough cash in your account to be able to hold your position even if the price goes to $90 per barrel. You'd need (90-70.45)*1000 + 4700 = $24,250 in your account at the start. If, after one year the price of the front month contract is still $70.45 and you've collected $1630 each month, your return would be a whopping (12*1630)/24,250 = 81%, not counting any interest on reinvested cash.
And that's if the price stays flat. If it goes down, you make even more. And the price can rise by up to $19.56, to $90 per barrel, over the next year and you'll break even.
How is this possible and what could go wrong? If you sell oil here, you are taking on the risk of something BAD happening to the world's crude oil supply. Iran, nukes, N. Korea, Nigeria, Venezuela, you name it. It's like you're an insurance company and you are selling geopolitical hazard insurance -- you better expect to make a profit if nothing goes wrong, because if something does go wrong, it's going to be expensive.
Does it make sense to buy crude, then? I wouldn't think so. I mean, I wouldn't really expect it to go up more than $20 over the next year and be over $90. But then a year ago I wouldn't have expected it to go up $20 from $50 either. I must say though, that Ahmadinejad guy scares me. I guess that's why the geopolitical hazard insurance is so expensive!
And keep in mind that the spread from month to month fluctuates and is particularly high right now, so I wouldn't expect to make 80% per year shorting crude either. But for now, the spread is huge and you have to be awfully smart to make money going long.
Good trading,
Aaron Schindler
Schindler Trading
Or look at it another way, if you sold the front month crude contract and rolled it over every month, and a year from now the price of the front month contract was still $70.45, you would have made a 19.56/70.45 = 27.8% return on your money <i>even if you didn't use any leverage</i>.
Say you used leverage and sold 1 ICE WTI contract. The overnight maintenance margin requirement on this 1000 barrel contract is $4700. Plus you decide you want to have enough cash in your account to be able to hold your position even if the price goes to $90 per barrel. You'd need (90-70.45)*1000 + 4700 = $24,250 in your account at the start. If, after one year the price of the front month contract is still $70.45 and you've collected $1630 each month, your return would be a whopping (12*1630)/24,250 = 81%, not counting any interest on reinvested cash.
And that's if the price stays flat. If it goes down, you make even more. And the price can rise by up to $19.56, to $90 per barrel, over the next year and you'll break even.
How is this possible and what could go wrong? If you sell oil here, you are taking on the risk of something BAD happening to the world's crude oil supply. Iran, nukes, N. Korea, Nigeria, Venezuela, you name it. It's like you're an insurance company and you are selling geopolitical hazard insurance -- you better expect to make a profit if nothing goes wrong, because if something does go wrong, it's going to be expensive.
Does it make sense to buy crude, then? I wouldn't think so. I mean, I wouldn't really expect it to go up more than $20 over the next year and be over $90. But then a year ago I wouldn't have expected it to go up $20 from $50 either. I must say though, that Ahmadinejad guy scares me. I guess that's why the geopolitical hazard insurance is so expensive!
And keep in mind that the spread from month to month fluctuates and is particularly high right now, so I wouldn't expect to make 80% per year shorting crude either. But for now, the spread is huge and you have to be awfully smart to make money going long.
Good trading,
Aaron Schindler
Schindler Trading
you taught me something....thanks
the rollover last month was about a buck too...maybe a little more? but the price of crude also went up
wow, 2 days left in the week and my prediction is about to come true. June traded above 74 briefly today, but then pulled back before the close. Traderguy, there is no sense in fading me or this market. Crude has ended on its highs the last 4 days!!!! This thing is like Jerome Bettis coming at you 100 miles an hour. You get in front of it and get RUN OVER (by THE bus). That being said, wait for a crack before you short it because everyone is long and getting longer! I think this is going to crash hard when it breaks, but there is no sense in trying to call a top until you see it actually occur.
anybody calling a top here?
I think we've had a nice run...pretty much uncontested for the past 3 1/2 weeks...it has taken a lot of money to push prices this high this fast...it will take even more to push it higher (higher cost per item)...you kinda have to wonder how much cash is left on hand after moving the market this far in a short amount of time...looks like we are going to have 3 balanced days...basically there have been no new highs in what was a moving market...oil can always react to news/reports as we know...but if nothing unusual happens i'd feel safe calling oil expensive now
Why are you bullish?