longterm oil investment

[incrediblefx]

Hi,

I thought of buying mini oil futures contract for longterm investment.
My strategy is like this:
1). Buy 1 mini at $40
2). Add 1 mini at $30
3). Add 2 mini at $25

Assumed I can take the loss for the drop to $20 without being forced out and I plan to keep it for next 2 years.
Is this a sound strategy?

How about rollover cost etc? I'm equity investor and looking for alternative as oil look very cheap now.

 

[Papa Lazarou]

If you're holding for 2 years why not buy a further out contract like June9, then roll that in to dec9, June 10 etc. Those two contracts are always pretty liquid - well, liquid enough not to get completely screwed, and will cut your rolling costs down.

I don't trade mini's so i don't even know how far out they offer the strips.

Or why not buy into GSCI or similar index and leave the rolling to them? Personally if you're looking to buy and hold, it really makes little sense buying front month crude. Just my opinion!

Just off topic, did anyone see this.... Thought it was quite well done! In times as bad as this, humour is sometimes the only thing left!! Bleed The World

 

[incrediblefx]

If you're holding for 2 years why not buy a further out contract like June9, then roll that in to dec9, June 10 etc. Those two contracts are always pretty liquid - well, liquid enough not to get completely screwed, and will cut your rolling costs down.

I don't trade mini's so i don't even know how far out they offer the strips.

Or why not buy into GSCI or similar index and leave the rolling to them? Personally if you're looking to buy and hold, it really makes little sense buying front month crude. Just my opinion!

Just off topic, did anyone see this.... Thought it was quite well done! In times as bad as this, humour is sometimes the only thing left!! Bleed The World

I'm new to oil/futures trading but I've been trading actively over past 10 years in the stock market.
I always thought that I'll get the best price at the current month instead of buying contract 6 months ahead.
An example the contract June 09 is around 20% higher than the current month based on this data: NYMEX.com: Brent Crude Oil - Last Day

I didn't look at other index/etf because I can use less money.
Instead of paying $40k for entire contract, I need only to put marginal value of around 20% of contract value. Of course if the price drop I need to top up my margin.

What is the best way to buy oil futures while paying less premium for longterm?

 

[arabianights]

You might be better off buying a leveraged oil ETF, would also enable you to average down at a few more price levels...

 

[Papa Lazarou]

I'm new to oil/futures trading but I've been trading actively over past 10 years in the stock market.
I always thought that I'll get the best price at the current month instead of buying contract 6 months ahead.
An example the contract June 09 is around 20% higher than the current month based on this data: NYMEX.com: Brent Crude Oil - Last Day

I didn't look at other index/etf because I can use less money.
Instead of paying $40k for entire contract, I need only to put marginal value of around 20% of contract value. Of course if the price drop I need to top up my margin.

What is the best way to buy oil futures while paying less premium for longterm?

True. I'm not really sure in that case. My concern was just that you could end up rolling at a loss say six times in a period of six months. e.g. selling out of the front month and buying the next month basis contango. I guess it depends whether you think the spreads will stay in contango. With the amount of stuff evidently around in the near term you'll lose money on your rolls. Anyone else got any help on this one?

 

[N Rothschild]

You might be better off buying a leveraged oil ETF, would also enable you to average down at a few more price levels...

any recommended ETF's for oil mate? I'm going to be looking to do the same thing over the next few months, could be a better idea to spread bet the ETF as apposed to the futures contracts, what do you think?

 

[arabianights]

Don't know enough about it to recommend one ETF over another, I guess you need to look at the management fee and precisely how it is priced. If you were to spread bet the ETF then I wouldn't do a leveraged one though, the spread bet will provide you with the leverage, no point in double leveraging it.

 

[incrediblefx]

You might be better off buying a leveraged oil ETF, would also enable you to average down at a few more price levels...

this might be a good alternativ.
do you know which leveraged oil ETF?

 

[incrediblefx]

I've found this double long ETF:
ETF Securities

But strangely it doesn't seem to track crude oil movement on daily basis.
anyone has the idea where to buy this ETF?

 

[arabianights]

Any stockbroker ought to be able to get you it.

 

[jeffsmith]

I've found this double long ETF:
ETF Securities

But strangely it doesn't seem to track crude oil movement on daily basis.
anyone has the idea where to buy this ETF?

Don't have any idea of ETF. This you an search on the internet you get it easily.

 

[..]

It may pay to be LOIL

this might be a good alternativ.
do you know which leveraged oil ETF?

LSE:LOIL from ETF securities ETF Securities

I bought some a couple of days ago at $5, they reached $90 at their peak in the summer. Even as you suggest oil goes to $20, which is not likely, it may well base around $30-40 for some months.

I would not average down, bad form. You could choose to split your fund into 5, and buy 1/5 first, then the remainder as price rises, but not until. I understand your reasoning for wanting to average down, but it is not good form and even if you profit, you will not want to reinforce this strategy...

The benefit it that they are effectively a option on the price of oil - an option that doesn't expire. This would suit for holding more than a few months, your carrying costs / rollover in the futures may not be prohibitive but are not necessary with the leveraged ETF.

I am tracking my trade in my SIPP on Silverstein on Commodities