Jfonseca they are right.. You will loose time and time again when positions will be rolled forward. If you want to play it with ETF, then check DBO. This is where I am invested. They hold many contracts at the same time and OPTIMIZE roll. Check DBO vs USO.. While DBO made low at the same time USO did a few weeks back, it is now trading 15% above that low, while USO is almost at that low made back then.. One good spread trade could actually be to go long DBO and short USO.. But beware when spot rallies, USO will gain more and DBO will gain less. But on the long enough time now that contango is that steep, DBO should loose less.
But those are really unprecedented times. I too was looking at the charts and how oil always rebounded and quickly moved back to 40$ etc.. But the problem now is that contango is soo steep you actually do not make any money on slow rise.. Crude would have to shoot up which currently it does not look to do so with demand down for quite some time..
I am still in DBO with most of my account, but I dont know how much longer I will stay in this trade, maybe its time to take losses and move on.. It really does not look too good for oil short to mid term and steep contango will eat all the profits..
But those are really unprecedented times. I too was looking at the charts and how oil always rebounded and quickly moved back to 40$ etc.. But the problem now is that contango is soo steep you actually do not make any money on slow rise.. Crude would have to shoot up which currently it does not look to do so with demand down for quite some time..
I am still in DBO with most of my account, but I dont know how much longer I will stay in this trade, maybe its time to take losses and move on.. It really does not look too good for oil short to mid term and steep contango will eat all the profits..
It was different in the previous contango situations, because price shoot up. I only looked at 2008 and 2009 just now and price of oil went from 40 to 80 in 1 year. So 100 % return? Well if you invested in DBO which optimizes roll and everything you made 45 %... Still a nice return for sure, but price had to double and this was in 1 year. Currently price is not 18 as you take into your calculations but 25$. Yes, may closed at 18, but now active contract is june trading at 25$.. And like everybody else showed you. If you believe price will go up, you can buy 1 year out futures currently trading at 35. Or 6 months out again trading at 34-35.. So if price goes back to 40$, how much do you make? Only the difference between 35$ to 40$, not the difference from current spot price.. This is the problem. You cannot buy SPOT! You only option is to buy futures contract which already trades with contango or lets call it premium. Price of 6 month out is already 35$, while current spot price is 20.. This means if oil actually does rise from 20/25 to 35 which it probably will, you make exactly 0$.. It has to go to at least 36$ for you to make a 1$ or 1.000$ per contract.. This is the problem.. Everyone know price is too low now and everyone want to make money on this so further out months are already bid up and there is no way for you to buy at spot and sell at 40$ other than to take delivery of oil and store it somewhere.. Or lease a tanker.. So again no backtest needs to be done.. All you need to do is to speculate on the price in 3 months or 6 months or 12 months and if you think oil will be higher than what futures are trading on that month not current spot, then buy it. I am also bullish on oil, I know price will not be at 20 or 25 for long, but unfortunatelly there is not way for me or you to make money betting it will rise from 20 to 30$.. It has to go up more than the difference on curvature.. And currently 1 mo out is 25, 2 months out is 30 and so on.. If you bet oil will be 30 in 2 month and it is, again, you make 0$.. It has to be higher. It has to be above 35 in 6 months or you again loose.. 