How to profit from oil price rise?
Discussion
Another stupid question from the PH financial gurus!
It seems to me likely that the oil price will rise by 10-20% in 2018. Without filling my yard with physical barrels of crude is there a way I can use some spare cash to profit from this?
I have an account with HL and quickly found the funds OIL, 3OIL, OILB and OILW. Looking at charts, all accurately (and dramatically) reflected the drop from >$100/bbl to current levels, although if memory serves it looks like they dropped ahead of the oil price itself (haven't confirmed).
Can't see more than 5 yrs back so can't see how they reflected the rise to >$100/bbl, but the recent move from ca. $50-65 seems reasonable.
Looks too good to be true, so is it?
All input greatfully received.
PS - based on past performance, if I think something is a good investment you should give it a wide berth.
It seems to me likely that the oil price will rise by 10-20% in 2018. Without filling my yard with physical barrels of crude is there a way I can use some spare cash to profit from this?
I have an account with HL and quickly found the funds OIL, 3OIL, OILB and OILW. Looking at charts, all accurately (and dramatically) reflected the drop from >$100/bbl to current levels, although if memory serves it looks like they dropped ahead of the oil price itself (haven't confirmed).
Can't see more than 5 yrs back so can't see how they reflected the rise to >$100/bbl, but the recent move from ca. $50-65 seems reasonable.
Looks too good to be true, so is it?
All input greatfully received.
PS - based on past performance, if I think something is a good investment you should give it a wide berth.
Edited by Jambo85 on Tuesday 26th December 18:18
Edited by Jambo85 on Tuesday 26th December 18:19
Thanks. I was going to mention BP and Shell in my original post ... they are pretty much already back at pre-crash levels, share price wise at least. I suppose this reflects the dividend they seek to maintain and hence low risk, ish? But also will a modest oil price rise be reflected in their share price, and/or is it already priced in?
I don't think we'll see >$100 in the next 10 years, so hoping to see a modest oil price rise reflected...
I don't think we'll see >$100 in the next 10 years, so hoping to see a modest oil price rise reflected...
You can buy it in the futures market too, if you think the price is going to rise, buy a futures contract for delivery in say 9 months, then sell it once you have realised a profit.
It’s very highly leveraged though, so you need a fairly big deposit and if it goes against you, the margin call could be rather unpleasant!
I would advise extreme caution though, and do your research, it’s a lot more likely to bankrupt you than simply buying BP shares.
I’ve got both BP and She’ll, dividends of both are good but the PE ratio is very marginal, so they are paying divis out of reserves rather than profits.
If they don’t start making good profits in coming months I think there might be a risk of a dividend cut.
It’s very highly leveraged though, so you need a fairly big deposit and if it goes against you, the margin call could be rather unpleasant!
I would advise extreme caution though, and do your research, it’s a lot more likely to bankrupt you than simply buying BP shares.
I’ve got both BP and She’ll, dividends of both are good but the PE ratio is very marginal, so they are paying divis out of reserves rather than profits.
If they don’t start making good profits in coming months I think there might be a risk of a dividend cut.
Thanks again.
Yes the majors are not what they used to be and never will be again IMO, which is part of the reason I'm wondering if there is another way to go about it. The other thing I didn't state in my original post is that with supply/demand tightening a price rise seems obvious, so if there is still room for a plonker like me to profit I'll be surprised!
Yes the majors are not what they used to be and never will be again IMO, which is part of the reason I'm wondering if there is another way to go about it. The other thing I didn't state in my original post is that with supply/demand tightening a price rise seems obvious, so if there is still room for a plonker like me to profit I'll be surprised!
jeff m2 said:
Where did you see a projection of 20%?
I thought the projection was 8 or 9%
I hope you aren't planning to start a war
99% of projections are wrong anyway. If someone really knew what the market was going to do they'd be keeping it to themselves, but analysts just need to write something. I thought the projection was 8 or 9%
I hope you aren't planning to start a war
Who can trade options on behalf of small investors? The banks etc will trade them for high worth clients and institutions but as a private individual you would need to be spending a lot to make it worth their while, and then expect to pay more fees when they are exercised or if you wanted to trade the futures around them.
OP; the usual way would be an ETF either a simple oil price ETF, or one heavily weighted towards oil companies.
These are some to consider;
http://etfdb.com/type/commodity/energy/crude-oil/
OP; the usual way would be an ETF either a simple oil price ETF, or one heavily weighted towards oil companies.
These are some to consider;
http://etfdb.com/type/commodity/energy/crude-oil/
Buying a simple oil etf via HL is the easiest and probably cheapest way if it is a short term trade based purely on the oil price. If you can, try and buy one denominated in GBP as the exchange rates that most brokers use to exchange GBP for USD include a considerable mark-up (1% or so, so 2% round trip). You can get leveraged etf's too - eg UWTI which is 3X leveraged but that is only in USD and, obviously, very volatile. Remember you have currency exposure too - so if sterling strengthens against the dollar you will lose some of your return.
Futures the easiest way but most likely not suitable here, as stated above easiest way is etfs USO being the most popular.
Stay away from the 3x etfs they really aren't designed to be kept as buy and hold more a quick 1-2 day trade. Uwti if i remember right was delisted few months back.
Stay away from the 3x etfs they really aren't designed to be kept as buy and hold more a quick 1-2 day trade. Uwti if i remember right was delisted few months back.
Someone mentioned that buying a call option would be the best way to get exposure to an increase in oil price, with downside limited to the cost of the option.
Possibly the simplest way to do so is to buy through IG.
You will pay the spread (difference between buy price and sell price of the option) so its not a very efficient way to do it if larger sums are involved, but it must be among the easiest ways to achieve the OP's objective.
Possibly the simplest way to do so is to buy through IG.
You will pay the spread (difference between buy price and sell price of the option) so its not a very efficient way to do it if larger sums are involved, but it must be among the easiest ways to achieve the OP's objective.
I thought it would be interesting to revisit this.
Since I posted:
Brent price from $62 to $72 = 16% rise
3OIL - up about 35%
OILB - up about 15%
Shell about where they were, although still with a 5.5% dividend.
All of them had significant wobbles in Feb/Mar.
What did I do - I didn't have the balls for the ETFs as I felt I didn't really understand them (if there is anything to understand), and I'm not sure I could have held 3OIL in particular through the dips. I bought a small number of Shell shares during a wobble (not claiming to have identified it as such at the time), I'm about 9% up plus dividends to come (I hope) and I continue to hold a number in my own O&G employer which is up about 4% with a ca. 3% dividend. But for the most part I followed the rational investor thinking that someone wrote about and refused to believe that I "knew" something that wasn't already priced in, and put most of my spare cash into managed funds.
I've sold nothing so of course it could all still go tits up!
Since I posted:
Brent price from $62 to $72 = 16% rise
3OIL - up about 35%
OILB - up about 15%
Shell about where they were, although still with a 5.5% dividend.
All of them had significant wobbles in Feb/Mar.
What did I do - I didn't have the balls for the ETFs as I felt I didn't really understand them (if there is anything to understand), and I'm not sure I could have held 3OIL in particular through the dips. I bought a small number of Shell shares during a wobble (not claiming to have identified it as such at the time), I'm about 9% up plus dividends to come (I hope) and I continue to hold a number in my own O&G employer which is up about 4% with a ca. 3% dividend. But for the most part I followed the rational investor thinking that someone wrote about and refused to believe that I "knew" something that wasn't already priced in, and put most of my spare cash into managed funds.
I've sold nothing so of course it could all still go tits up!
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