Oil now at 36 bucks..
- Thread starter TheCaymanIsland
- Start date
chances are less than 50% to remain at $3 at Feb09 contract expiration.
my estimate is Feb09 contract will lose 10 cents /day ( on average ) relative to Mar09 contract , so for 20 days ( remaining ) it is $2000 ( on top of current $3000 difference ), It may not be linear spread widens in the last week most.
For argument sake let us assume spread may remain at $3 , even in that case the person who enter this spread DO NOT lose any money.
I would love to enter any trade where the down side is very minimal with good upside potential which is the case of this Mar09/Feb09 Long/short crude spread.
crude Trade 2
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Here is another trade I entered , I bought $45 Feb09 crude options CALL for $1400 today. I will use this insurance to to short crude for any price above $41-$43 for next 25 days, I am sure I will get my $1400 back and make some profit.
Agreed, especially on XOM. Here's an interesting article which is kind of an eye opener.
http://seekingalpha.com/article/113...iant-s-real-valuation?source=article_sb_picks
Interesting article.
And as many in the oil patch know, XOM's reserves have been fairly flat and not grown over the years; with the company buying back stock in order to boost earnings. Current valuation does appear rich given that we are nowhere near price levels in crude ( and nat-gas ) of last year. Also, the intangibles of oil production and exploration in Venezuela and Russia can be a bitch, especially when cash strapped countries want to be the first in line to pump ALL the oil that they can.
On the plus side, I have to think that XOM hedged nothing less than 75% of its 2009 production and perhaps as much as 50% of 2010 production hedged. That is going to help "cushion" any kind of earnings decline, and won't be an absolute 50% cut in EPS as the author claims.
In any event, a "compression" in the earnings multiple of XOM is certainly possible at this juncture.
NOTE: CSFB says:
At $45 [per barrel] oil and $6 [per MMBtu] gas (2009 curve currently at $44.25 [per barrel] oil and $6.00 [per MMBtu] gas), the stocks are trading at a 37% premium to NAV, with the gas-focused names at a 43% premium and oil E&Ps at a 22% premium.
At $40 [per barrel] oil and $5.50 [MMBtu] gas (closer to current spot prices), the E&Ps are trading at a 65% premium-to-proved NAV with the gas names at a 75% premium versus 55% for the oilier names.â
Hear I am referring my old forecasts above .....
Today Mar09/Feb09 long/short spread is $4500
- the reason at that time was mainly ( before middle east issue) oil will further drop
- It is interesting even oil spiked due to middle east issue still this spread today is $4500 ( $4.5 x 1000 ) dollars giving 50% profit on original investment of $3000 with very minimum risk for 20 days wait period ..
2) even the "crude Trade 2" above paid multiple times for any investor that is strategy using "option " as insurance to benefit short oil contract
can you please give the web link for these tankers ... thanks
InvestVision,
Great call! Current Feb/Mar spread is at $8.20 now.
I have never done spreads, but definitely interested in trying out due to good risk/reward ratio. What is your forecast for next month's roll over time? Right now the Mar/Apr spread is at 4.62. Is this a little high?
