Time to short Crude with SCO?
- Thread starter KCalhoun
- Start date
I read this past week that OPEC is thinking of opening the taps again, now that prices are "stable", whatever they are implying by that.
The $38-$45 range we saw as a whole for much of the second half of 2020 has shifted $15 higher.
It's not a bad play.
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The range in CL I mean.
Be careful with the commodity ETFs, as you may get a K-1 that assigns you gains or losses that have little to do with your actual trades. I'm sure some knowledgeable posters here can chime in as to how this works. Using options may be the better way to go if you are concerned about the K-1.
Info here: https://www.proshares.com/funds/sco.html
ProShares UltraShort Bloomberg Crude Oil seeks daily investment results, before fees and expenses, that correspond to two times the inverse (-2x) of the daily performance of the Bloomberg Commodity Balanced WTI Crude Oil Index.
This short ProShares ETF seeks a return that is -2x the return of its underlying benchmark (target) for a single day, as measured from one NAV calculation to the next. Due to the compounding of daily returns, holding periods of greater than one day can result in returns that are significantly different than the target return and ProShares' returns over periods other than one day will likely differ in amount and possibly direction from the target return for the same period. These effects may be more pronounced in funds with larger or inverse multiples and in funds with volatile benchmarks. Investors should monitor their holdings as frequently as daily. Investors should consult the prospectus for further details on the calculation of the returns and the risks associated with investing in this product.
Info here: https://www.proshares.com/funds/sco.html
ProShares UltraShort Bloomberg Crude Oil seeks daily investment results, before fees and expenses, that correspond to two times the inverse (-2x) of the daily performance of the Bloomberg Commodity Balanced WTI Crude Oil Index.
- The fund’s benchmark is an index of crude oil futures contracts
- It is not intended to track the performance of the spot price of WTI crude oil
- It should be expected to perform very differently from the spot price of WTI crude oil
This short ProShares ETF seeks a return that is -2x the return of its underlying benchmark (target) for a single day, as measured from one NAV calculation to the next. Due to the compounding of daily returns, holding periods of greater than one day can result in returns that are significantly different than the target return and ProShares' returns over periods other than one day will likely differ in amount and possibly direction from the target return for the same period. These effects may be more pronounced in funds with larger or inverse multiples and in funds with volatile benchmarks. Investors should monitor their holdings as frequently as daily. Investors should consult the prospectus for further details on the calculation of the returns and the risks associated with investing in this product.
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Gains or losses from a K-1 affect the basis in a taxable account, but not in a nontaxable account.
https://www.proshares.com/k-1_tax_information/
The other worry about K-1's is unrelated business taxable income (UBTI) which could affect a nontaxable account. This shouldn't be an issue with ETFs because they are not trying to run a business (could be in an individual MLP though).
If you’re shorting I’m buying
Crude oil is currently bullish on an 80-day Donchian long breakout.
Which is to say, historical backtesting shows that it is better to be long crude oil than short crude oil, all else being equal.
If you have some short-term trading method/system that you are keeping close to your chest, than that might be a different story altogether.....but from a "big picture" perspective, the historical testing says "don't overthink it, just stay long."
Which is to say, historical backtesting shows that it is better to be long crude oil than short crude oil, all else being equal.
If you have some short-term trading method/system that you are keeping close to your chest, than that might be a different story altogether.....but from a "big picture" perspective, the historical testing says "don't overthink it, just stay long."
I'd be careful with anything coming off monthly option expiry. There is no certainty on what will occur tonight/tomorrow but recent weeks suggest metals may do well for a day. Oil ran up quite quickly it may just be a natural profit taking pullback. I scaled back my Oil related positions regardless only in two now so I can move quickly in either direction. Two natural gas related positions I feel good about long term regardless of short term market moves.
Earnings reports so far in Cdn gold mining and nat gas stocks were extremely encouraging, suggesting the companies are now lean and profitable with good prospects. I have to weight that against the poor market sentiment on the former and how quickly the latter have rallied in recent months. I was considering numerous junior and mid cap copper miners Thursday night but I was a day late they all skyrocketed the next morning ( bought one but won't chase yet ).
Good points..... oil sector I like OXY APA SCO.... for gold GDX vs DUST... for copper FCX.... any favorite copper tickers re jr/midcap miners?