How can I "buy into oil" at these prices?

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bmelikia
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How can I "buy into oil" at these prices?

Post by bmelikia » Mon Apr 20, 2020 12:47 pm

How does one "buy into oil" at these prices? As of this post - a barrel of oil is around $1.65 a barrel.

I'm willing to toss 5k into something but USO and UGA are the only 2 funds I know of that are supposed to have some form of "tracking" of the oil price but I've watched them for some time and their price correlation is way out of whack.

Anyone else have any constructive comments of how to "feasibly" accomplish such a thing?
"I would rather die with money, than live without it...." - Bogleheads member Ron | | "The greatest enemy of a good plan, is the dream of a perfect plan." | -Bogle

Silk McCue
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Re: How can I "buy into oil" at these prices?

Post by Silk McCue » Mon Apr 20, 2020 12:50 pm

What makes you think buying into oil right now is a good idea?

Cheer

ironman
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Re: How can I "buy into oil" at these prices?

Post by ironman » Mon Apr 20, 2020 12:52 pm

They can't give the stuff away at this point
Last edited by ironman on Mon Apr 20, 2020 12:55 pm, edited 1 time in total.

Topic Author
bmelikia
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Re: How can I "buy into oil" at these prices?

Post by bmelikia » Mon Apr 20, 2020 12:53 pm

Silk McCue wrote:
Mon Apr 20, 2020 12:50 pm
What makes you think buying into oil right now is a good idea?

Cheer
Nothing- I just know that historically the pricing is wildly cheap and I have 5k that wouldn't impact my life one way or another that I'd be willing to see where we're at 5 years from now
"I would rather die with money, than live without it...." - Bogleheads member Ron | | "The greatest enemy of a good plan, is the dream of a perfect plan." | -Bogle

gch
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Re: How can I "buy into oil" at these prices?

Post by gch » Mon Apr 20, 2020 12:54 pm

bmelikia wrote:
Mon Apr 20, 2020 12:47 pm
How does one "buy into oil" at these prices? As of this post - a barrel of oil is around $1.65 a barrel.

I'm willing to toss 5k into something but USO and UGA are the only 2 funds I know of that are supposed to have some form of "tracking" of the oil price but I've watched them for some time and their price correlation is way out of whack.

Anyone else have any constructive comments of how to "feasibly" accomplish such a thing?
You can buy the $2 (May delivery) but it settles tomorrow so you’d have to sell by tomorrow or take physical delivery of the 1k barrels.

The June delivery (which would give you a month to sell or take physical delivery) is at $22.

Leesbro63
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Re: How can I "buy into oil" at these prices?

Post by Leesbro63 » Mon Apr 20, 2020 12:56 pm

I’m following UGA. It hasn’t gone down anywhere enough to reflect $1 per bbl oil. There’s something going on here that is beyond my knowledge/understanding. Something I know I don’t know.

Silk McCue
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Re: How can I "buy into oil" at these prices?

Post by Silk McCue » Mon Apr 20, 2020 12:58 pm

bmelikia wrote:
Mon Apr 20, 2020 12:53 pm
Silk McCue wrote:
Mon Apr 20, 2020 12:50 pm
What makes you think buying into oil right now is a good idea?

Cheer
Nothing- I just know that historically the pricing is wildly cheap and I have 5k that wouldn't impact my life one way or another that I'd be willing to see where we're at 5 years from now
It is best not to buy something that you don't understand. Just because something appears cheap doesn't mean you can make money off of it.

Cheers

DonIce
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Re: How can I "buy into oil" at these prices?

Post by DonIce » Mon Apr 20, 2020 1:02 pm

bmelikia wrote:
Mon Apr 20, 2020 12:47 pm
How does one "buy into oil" at these prices? As of this post - a barrel of oil is around $1.65 a barrel.

I'm willing to toss 5k into something but USO and UGA are the only 2 funds I know of that are supposed to have some form of "tracking" of the oil price but I've watched them for some time and their price correlation is way out of whack.

Anyone else have any constructive comments of how to "feasibly" accomplish such a thing?
You can't, unless you own physical oil storage and transportation capabilities.

Oil will be back up to ~$20 tomorrow when the June contract becomes the front month contract instead of the May contract.

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bmelikia
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Re: How can I "buy into oil" at these prices?

Post by bmelikia » Mon Apr 20, 2020 1:04 pm

Silk McCue wrote:
Mon Apr 20, 2020 12:58 pm
bmelikia wrote:
Mon Apr 20, 2020 12:53 pm
Silk McCue wrote:
Mon Apr 20, 2020 12:50 pm
What makes you think buying into oil right now is a good idea?

Cheer
Nothing- I just know that historically the pricing is wildly cheap and I have 5k that wouldn't impact my life one way or another that I'd be willing to see where we're at 5 years from now
It is best not to buy something that you don't understand. Just because something appears cheap doesn't mean you can make money off of it.

Cheers
Silk - I'm financially comfortable to make the decision. That's why I'm not electing to buy into USO or UGA because I don't understand the correlation (maybe you didn't take the time to ready my original post?)- you can refer back to my original post if you'd like to help me out with my question I asked.

I promise I'm not asking for opinions
"I would rather die with money, than live without it...." - Bogleheads member Ron | | "The greatest enemy of a good plan, is the dream of a perfect plan." | -Bogle

Iridium
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Re: How can I "buy into oil" at these prices?

Post by Iridium » Mon Apr 20, 2020 1:05 pm

Unfortunately, the price you are seeing is really a reflection of a lack of storage space more than a crash in oil prices. The way to 'buy in' to the current craziness is if you happened to already own an oil storage facility, then you would get paid nearly $20 / barrel for holding onto it for a month. Unfortunately, next month is unlikely to have the same issue (OPEC+ deal to cut production so hopefully inventories will be down), so I wouldn't buy into oil storage just because of today's glitch.

What I want to know is why the oil tankers that happen to be near by aren't getting in on this deal. They would get paid more to just sit in port for a month than they would normally make burning fuel taking it across the Atlantic.

Silk McCue
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Re: How can I "buy into oil" at these prices?

Post by Silk McCue » Mon Apr 20, 2020 1:11 pm

FYI - We have multiple other active posts on this topic as it seems like lots of people want to buy oil stocks now.

Cheers

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bmelikia
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Re: How can I "buy into oil" at these prices?

Post by bmelikia » Mon Apr 20, 2020 1:16 pm

Silk McCue wrote:
Mon Apr 20, 2020 1:11 pm
FYI - We have multiple other active posts on this topic as it seems like lots of people want to buy oil stocks now.

Cheers
Saw that - they inspired my post - thank you Silk
"I would rather die with money, than live without it...." - Bogleheads member Ron | | "The greatest enemy of a good plan, is the dream of a perfect plan." | -Bogle

anil686
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Re: How can I "buy into oil" at these prices?

Post by anil686 » Mon Apr 20, 2020 1:18 pm

You would need to store the oil and then sell it back in the future. The issue right now is storage. If you wanted to make money on this - tanker stocks were the play months ago - there were oil analysts who were bullish on the tanker stocks in January - pre covid US because supply was already high and they were charging a lot more because their routes were getting longer just to take time. Now those tankers have no more space after charging super high rates to hold the oil. I do not know the minimum number of barrels to buy however...

Dave55
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Re: How can I "buy into oil" at these prices?

Post by Dave55 » Mon Apr 20, 2020 1:21 pm

bmelikia wrote:
Mon Apr 20, 2020 12:47 pm
How does one "buy into oil" at these prices? As of this post - a barrel of oil is around $1.65 a barrel.

I'm willing to toss 5k into something but USO and UGA are the only 2 funds I know of that are supposed to have some form of "tracking" of the oil price but I've watched them for some time and their price correlation is way out of whack.

Anyone else have any constructive comments of how to "feasibly" accomplish such a thing?
Open up a an account at Schwab, ETrade or TD Ameritrade (there are others) to trade the oil futures contract. If you don't know what you are doing, chances are you could lose a lot more than your $5,000.

Dave

pocketplayer
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Re: How can I "buy into oil" at these prices?

Post by pocketplayer » Mon Apr 20, 2020 1:39 pm

Is this being too naive? Look at this drop...you telling me
it isnt going up and this isnt a good buying time?
Drudge headline probably helps here if you like drama
OIL PRICE LOWEST IN HISTORY

VENAX
https://investor.vanguard.com/mutual-fu ... file/venax

VDE
https://investor.vanguard.com/etf/profile/VDE

VGENX
https://investor.vanguard.com/mutual-fu ... file/VGENX

vipertom1970
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Re: How can I "buy into oil" at these prices?

Post by vipertom1970 » Mon Apr 20, 2020 1:45 pm

it's only 5k, have fun with it but it's like I pay you to take a barrel away from me right now.
Last edited by vipertom1970 on Mon Apr 20, 2020 2:05 pm, edited 2 times in total.

AlphaLess
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Re: How can I "buy into oil" at these prices?

Post by AlphaLess » Mon Apr 20, 2020 1:46 pm

bmelikia wrote:
Mon Apr 20, 2020 12:47 pm
How does one "buy into oil" at these prices? As of this post - a barrel of oil is around $1.65 a barrel.

I'm willing to toss 5k into something but USO and UGA are the only 2 funds I know of that are supposed to have some form of "tracking" of the oil price but I've watched them for some time and their price correlation is way out of whack.

Anyone else have any constructive comments of how to "feasibly" accomplish such a thing?
Wait a bit. It will be negative 20 soon.
"A Republic, if you can keep it". Benjamin Franklin. 1787. | Party affiliation: Vanguard. Religion: low-cost investing.

Iridium
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Re: How can I "buy into oil" at these prices?

Post by Iridium » Mon Apr 20, 2020 1:55 pm

pocketplayer wrote:
Mon Apr 20, 2020 1:39 pm
Is this being too naive? Look at this drop...you telling me
it isnt going up and this isnt a good buying time?
Drudge headline probably helps here if you like drama
OIL PRICE LOWEST IN HISTORY

VENAX
https://investor.vanguard.com/mutual-fu ... file/venax

VDE
https://investor.vanguard.com/etf/profile/VDE

VGENX
https://investor.vanguard.com/mutual-fu ... file/VGENX
Take a look at VDE price chart for the last 5 days. It doesn't show much drop. Oil is $2 because there is no place to store it and all the users have all they need (they are probably sitting on a lot of gasoline themselves).

Oil is trading for an order of magnitude higher for delivery next month. The market is, wisely, but punishing oil firms that much much for this temporary glitch, so investing in energy isn't necessarily the steal that you believe (yes, it has dropped 50% in the last year, but given that demand looks to remain soft and OPEC+ seems increasingly unwilling to make way for US production, it is very likely that many energy companies are not going to make it another year - so some level of drop in an energy sector fund is expected).

On an unrelated note: we appear to be watching the bullwhip effect for supply chains in action right now. Makes me wonder what the TP aisle will look like in a month.
Last edited by Iridium on Mon Apr 20, 2020 1:58 pm, edited 1 time in total.

Patzer
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Re: How can I "buy into oil" at these prices?

Post by Patzer » Mon Apr 20, 2020 1:58 pm

AlphaLess wrote:
Mon Apr 20, 2020 1:46 pm
bmelikia wrote:
Mon Apr 20, 2020 12:47 pm
How does one "buy into oil" at these prices? As of this post - a barrel of oil is around $1.65 a barrel.

I'm willing to toss 5k into something but USO and UGA are the only 2 funds I know of that are supposed to have some form of "tracking" of the oil price but I've watched them for some time and their price correlation is way out of whack.

Anyone else have any constructive comments of how to "feasibly" accomplish such a thing?
Wait a bit. It will be negative 20 soon.
Bottomed at -40.32, now trading at -22.49.

Patzer
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Re: How can I "buy into oil" at these prices?

Post by Patzer » Mon Apr 20, 2020 2:00 pm

bmelikia wrote:
Mon Apr 20, 2020 12:47 pm
How does one "buy into oil" at these prices? As of this post - a barrel of oil is around $1.65 a barrel.

I'm willing to toss 5k into something but USO and UGA are the only 2 funds I know of that are supposed to have some form of "tracking" of the oil price but I've watched them for some time and their price correlation is way out of whack.

Anyone else have any constructive comments of how to "feasibly" accomplish such a thing?
This is going to sound mean... but it's true.

You don't know what you are doing. You know nothing about trading oil. People that know how to trade oil are getting burned, but you think you are going to do better than them, based on what?

Just hold onto your cash.

Blender
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Re: How can I "buy into oil" at these prices?

Post by Blender » Mon Apr 20, 2020 2:04 pm

Dave55 wrote:
Mon Apr 20, 2020 1:21 pm
If you don't know what you are doing, chances are you could lose a lot more than your $5,000.

Dave
This. Are you prepared to cover the costs to transport and/or store it?

AlphaLess
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Re: How can I "buy into oil" at these prices?

Post by AlphaLess » Mon Apr 20, 2020 2:04 pm

Patzer wrote:
Mon Apr 20, 2020 2:00 pm
You don't know what you are doing. You know nothing about trading oil. People that know how to trade oil are getting burned, but you think you are going to do better than them, based on what?
This by far is one of the smartest thing said on this thread, and any related threads.
"A Republic, if you can keep it". Benjamin Franklin. 1787. | Party affiliation: Vanguard. Religion: low-cost investing.

AlphaLess
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Re: How can I "buy into oil" at these prices?

Post by AlphaLess » Mon Apr 20, 2020 2:06 pm

Silk McCue wrote:
Mon Apr 20, 2020 1:11 pm
FYI - We have multiple other active posts on this topic as it seems like lots of people want to buy oil stocks now.

Cheers
Bing: oil strocks are twice / thrice removed from the oil price.

So, yea, that is the sucker's play: paper money.

Unless you are trading PHYSICAL oil, everything else is PAPER money.
"A Republic, if you can keep it". Benjamin Franklin. 1787. | Party affiliation: Vanguard. Religion: low-cost investing.

AlphaLess
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Re: How can I "buy into oil" at these prices?

Post by AlphaLess » Mon Apr 20, 2020 2:08 pm

bmelikia wrote:
Mon Apr 20, 2020 12:47 pm
How does one "buy into oil" at these prices? As of this post - a barrel of oil is around $1.65 a barrel.

I'm willing to toss 5k into something but USO and UGA are the only 2 funds I know of that are supposed to have some form of "tracking" of the oil price but I've watched them for some time and their price correlation is way out of whack.

Anyone else have any constructive comments of how to "feasibly" accomplish such a thing?
Not advising to do the below
1. Open and FUND an IB account,
2. Try to figure out how to trade oil futures on CME.
"A Republic, if you can keep it". Benjamin Franklin. 1787. | Party affiliation: Vanguard. Religion: low-cost investing.

oregonian
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Re: How can I "buy into oil" at these prices?

Post by oregonian » Mon Apr 20, 2020 2:18 pm

Silk - I'm financially comfortable to make the decision. That's why I'm not electing to buy into USO or UGA because I don't understand the correlation (maybe you didn't take the time to ready my original post?)- you can refer back to my original post if you'd like to help me out with my question I asked.


OP -

having just bet (not invested) on 1K in USO @ sub $4, I understand your interest.

The difference between the immediate future contract (i.e. WTI) and what I presume is the time weighted USO probably explains the difference between the two. The USO claims to follow the 'spot' price and CL1 is a future price (nearest date). Note that the USO 'attempts' to do this, with what I assume is a time weighted mix of futures that roll over (e.g. 60% current month, 30% month +1, 10% month + 2) with those splits decreasing through the month.

The negative WTI today is probably a function of traders holding delivery contracts and discovering that no one wants to match up and kill them. Uh oh.

Fun to watch to some extent, like 'Towering Inferno' both for the novelty and as a portent of doom for Western Civilization (I think I'm kidding about that...)

FYI Oilprice.com is an interesting place for reading insider and conspiracy theory wackos. In the oil patch those are not necessarily different people, and sometimes the CT wackos have a better grasp of the future.

It makes perfect sense to me that this is occurring on the 10th anniversary of the DWH.

gobimanchurian
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Re: How can I "buy into oil" at these prices?

Post by gobimanchurian » Mon Apr 20, 2020 2:20 pm

I am wondering if buying USO 2022 options would work?

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Re: How can I "buy into oil" at these prices?

Post by LadyGeek » Mon Apr 20, 2020 2:26 pm

Welcome! gobimanchurian has asked this question here: USO SP 2.5 @ Jan 2022 Option (Is it a buy?) [US oil fund] (I replied)
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striker79
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Re: How can I "buy into oil" at these prices?

Post by striker79 » Mon Apr 20, 2020 2:35 pm

USO is suppose to track oil but its based on contracts. There is talk about USO possibly going to 0 and being liquidated similar to what happened to XIV. I would stay away from it. Price of oil could go up and USO can still be going down.

mancich
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Re: How can I "buy into oil" at these prices?

Post by mancich » Mon Apr 20, 2020 2:39 pm

$5,000 is $5,000. I personally wouldn't want to gamble on this. As another poster said, oil traders are getting burned, and they know what they're doing. Take the money and donate it, or put it to some other productive use. Just my two cents. :beer

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Re: How can I "buy into oil" at these prices?

Post by abuss368 » Mon Apr 20, 2020 3:26 pm

I actually saw oil hit 0.01 a barrel on CNBC today. I missed the decline to 0.00 and negative!
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randomguy
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Re: How can I "buy into oil" at these prices?

Post by randomguy » Mon Apr 20, 2020 4:05 pm

bmelikia wrote:
Mon Apr 20, 2020 12:53 pm
Silk McCue wrote:
Mon Apr 20, 2020 12:50 pm
What makes you think buying into oil right now is a good idea?

Cheer
Nothing- I just know that historically the pricing is wildly cheap and I have 5k that wouldn't impact my life one way or another that I'd be willing to see where we're at 5 years from now
How much do. you think it will cost to store a barrel of oil for 5 years?

bovineplane
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Re: How can I "buy into oil" at these prices?

Post by bovineplane » Mon Apr 20, 2020 4:23 pm

striker79 wrote:
Mon Apr 20, 2020 2:35 pm
USO is suppose to track oil but its based on contracts. There is talk about USO possibly going to 0 and being liquidated similar to what happened to XIV. I would stay away from it. Price of oil could go up and USO can still be going down.
If it goes to zero there should be nothing to liquidate. Maybe the stationary and other office products but wouldn't that indicate the underlying investments had zero value?

annu
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Re: How can I "buy into oil" at these prices?

Post by annu » Mon Apr 20, 2020 4:25 pm

I think financial is a better tilt, like jp Morgan, boa, or etf which include them, than oil......

WhiteMaxima
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Re: How can I "buy into oil" at these prices?

Post by WhiteMaxima » Mon Apr 20, 2020 4:37 pm

Oil refiner.

Dave55
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Re: How can I "buy into oil" at these prices?

Post by Dave55 » Mon Apr 20, 2020 5:43 pm

Blender wrote:
Mon Apr 20, 2020 2:04 pm
Dave55 wrote:
Mon Apr 20, 2020 1:21 pm
If you don't know what you are doing, chances are you could lose a lot more than your $5,000.

Dave
This. Are you prepared to cover the costs to transport and/or store it?
Not to mention getting a margin call if the market moves against your "long position". If the mkt keeps moving against your long, you stand to lose a lot more than $5,000.

Dave

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bmelikia
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Re: How can I "buy into oil" at these prices?

Post by bmelikia » Mon Apr 20, 2020 5:57 pm

I should have noted - I'm not interested in investing in something that would require me to take delivery of the commodity- have not, and would never consider something along those lines.

Just curious to know if there was a price indexed investment vehicle that moves in strong correlation to the price of oil that wouldn't require "taking delivery" of product or "storage". As I alluded to in my original post - more along the lines of a USO or UGA. That's all.

Other than that, I have enjoyed reading the general sentiment of shared concern for my 5k. . .
"I would rather die with money, than live without it...." - Bogleheads member Ron | | "The greatest enemy of a good plan, is the dream of a perfect plan." | -Bogle

DurangoWino
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Re: How can I "buy into oil" at these prices?

Post by DurangoWino » Mon Apr 20, 2020 5:59 pm

Buy USO Dec 2022 $5 calls for around $150 each. So for $5K you could buy about 33 calls. The most you could lose is your $5K but you could make much more if the price of oil goes up considerably over the next almost three years. For what it is worth those calls did quite well today in comparison to the current oil price going negative. Tells you that many folks think oil will be higher in Dec 2022. I sure do and own some of these calls. This is not investing but purely gambling. But if you are willing to flush your $5K down the toilet then I think it’s a good bet.

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bmelikia
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Re: How can I "buy into oil" at these prices?

Post by bmelikia » Mon Apr 20, 2020 6:02 pm

Patzer wrote:
Mon Apr 20, 2020 2:00 pm
bmelikia wrote:
Mon Apr 20, 2020 12:47 pm
How does one "buy into oil" at these prices? As of this post - a barrel of oil is around $1.65 a barrel.

I'm willing to toss 5k into something but USO and UGA are the only 2 funds I know of that are supposed to have some form of "tracking" of the oil price but I've watched them for some time and their price correlation is way out of whack.

Anyone else have any constructive comments of how to "feasibly" accomplish such a thing?
This is going to sound mean... but it's true.

You don't know what you are doing. You know nothing about trading oil. People that know how to trade oil are getting burned, but you think you are going to do better than them, based on what?

Just hold onto your cash.
I just think that in the next 5 years oil will trade higher than where it is currently being priced and I'm willing to be financially punished or rewarded in the future based on that investment thought. I would not put my money in an investment vehicle that would require me to "take delivery" of the commodity or anything. Just a USO/UGA styled investment vehicle if such a thing were to exist - that was the purpose of my post - to know if such an investment vehicle exists.

That is all.
"I would rather die with money, than live without it...." - Bogleheads member Ron | | "The greatest enemy of a good plan, is the dream of a perfect plan." | -Bogle

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bmelikia
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Re: How can I "buy into oil" at these prices?

Post by bmelikia » Mon Apr 20, 2020 6:05 pm

DurangoWino wrote:
Mon Apr 20, 2020 5:59 pm
Buy USO Dec 2022 $5 calls for around $150 each. So for $5K you could buy about 33 calls. The most you could lose is your $5K but you could make much more if the price of oil goes up considerably over the next almost three years. For what it is worth those calls did quite well today in comparison to the current oil price going negative. Tells you that many folks think oil will be higher in Dec 2022. I sure do and own some of these calls. This is not investing but purely gambling. But if you are willing to flush your $5K down the toilet then I think it’s a good bet.
Thank you DurangoWino
"I would rather die with money, than live without it...." - Bogleheads member Ron | | "The greatest enemy of a good plan, is the dream of a perfect plan." | -Bogle

emoore
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Re: How can I "buy into oil" at these prices?

Post by emoore » Mon Apr 20, 2020 6:07 pm

bmelikia wrote:
Mon Apr 20, 2020 6:02 pm
Patzer wrote:
Mon Apr 20, 2020 2:00 pm
bmelikia wrote:
Mon Apr 20, 2020 12:47 pm
How does one "buy into oil" at these prices? As of this post - a barrel of oil is around $1.65 a barrel.

I'm willing to toss 5k into something but USO and UGA are the only 2 funds I know of that are supposed to have some form of "tracking" of the oil price but I've watched them for some time and their price correlation is way out of whack.

Anyone else have any constructive comments of how to "feasibly" accomplish such a thing?
This is going to sound mean... but it's true.

You don't know what you are doing. You know nothing about trading oil. People that know how to trade oil are getting burned, but you think you are going to do better than them, based on what?

Just hold onto your cash.
I just think that in the next 5 years oil will trade higher than where it is currently being priced and I'm willing to be financially punished or rewarded in the future based on that investment thought. I would not put my money in an investment vehicle that would require me to "take delivery" of the commodity or anything. Just a USO/UGA styled investment vehicle if such a thing were to exist - that was the purpose of my post - to know if such an investment vehicle exists.

That is all.
But that's what you think, it's probably not what is going to happen.

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Re: How can I "buy into oil" at these prices?

Post by BH+ » Mon Apr 20, 2020 6:21 pm

bmelikia wrote:
Mon Apr 20, 2020 12:47 pm
How does one "buy into oil" at these prices? As of this post - a barrel of oil is around $1.65 a barrel.

I'm willing to toss 5k into something but USO and UGA are the only 2 funds I know of that are supposed to have some form of "tracking" of the oil price but I've watched them for some time and their price correlation is way out of whack.

Anyone else have any constructive comments of how to "feasibly" accomplish such a thing?

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bmelikia
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Re: How can I "buy into oil" at these prices?

Post by bmelikia » Mon Apr 20, 2020 7:52 pm

emoore wrote:
Mon Apr 20, 2020 6:07 pm
bmelikia wrote:
Mon Apr 20, 2020 6:02 pm
Patzer wrote:
Mon Apr 20, 2020 2:00 pm
bmelikia wrote:
Mon Apr 20, 2020 12:47 pm
How does one "buy into oil" at these prices? As of this post - a barrel of oil is around $1.65 a barrel.

I'm willing to toss 5k into something but USO and UGA are the only 2 funds I know of that are supposed to have some form of "tracking" of the oil price but I've watched them for some time and their price correlation is way out of whack.

Anyone else have any constructive comments of how to "feasibly" accomplish such a thing?
This is going to sound mean... but it's true.

You don't know what you are doing. You know nothing about trading oil. People that know how to trade oil are getting burned, but you think you are going to do better than them, based on what?

Just hold onto your cash.
I just think that in the next 5 years oil will trade higher than where it is currently being priced and I'm willing to be financially punished or rewarded in the future based on that investment thought. I would not put my money in an investment vehicle that would require me to "take delivery" of the commodity or anything. Just a USO/UGA styled investment vehicle if such a thing were to exist - that was the purpose of my post - to know if such an investment vehicle exists.

That is all.
But that's what you think, it's probably not what is going to happen.
I disagree - your comment that it's probably not going to happen is your "thought". . .one of us will be right
"I would rather die with money, than live without it...." - Bogleheads member Ron | | "The greatest enemy of a good plan, is the dream of a perfect plan." | -Bogle

Leesbro63
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Re: How can I "buy into oil" at these prices?

Post by Leesbro63 » Mon Apr 20, 2020 7:59 pm

Despite minor speculation in each at different times, I don’t really I understand USO and UGA. But I suspect current prices reflect what collective investors think is the underlying real price of oil. Discounting (putting on a premium realiy) the unusual activity in todayMs futures market.

absolute zero
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Re: How can I "buy into oil" at these prices?

Post by absolute zero » Mon Apr 20, 2020 8:16 pm

bmelikia wrote:
Mon Apr 20, 2020 6:02 pm
Patzer wrote:
Mon Apr 20, 2020 2:00 pm
bmelikia wrote:
Mon Apr 20, 2020 12:47 pm
How does one "buy into oil" at these prices? As of this post - a barrel of oil is around $1.65 a barrel.

I'm willing to toss 5k into something but USO and UGA are the only 2 funds I know of that are supposed to have some form of "tracking" of the oil price but I've watched them for some time and their price correlation is way out of whack.

Anyone else have any constructive comments of how to "feasibly" accomplish such a thing?
This is going to sound mean... but it's true.

You don't know what you are doing. You know nothing about trading oil. People that know how to trade oil are getting burned, but you think you are going to do better than them, based on what?

Just hold onto your cash.
I just think that in the next 5 years oil will trade higher than where it is currently being priced and I'm willing to be financially punished or rewarded in the future based on that investment thought.

That is all.
Literally the whole world thinks that oil will trade higher in the future. It’s called contango. Just google “oil futures” and look at any contract besides the May 2020 contract. No one in their right mind is expecting oil to still to be $1/bbl (or negative) in 5 years. Not even close.

absolute zero
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Re: How can I "buy into oil" at these prices?

Post by absolute zero » Mon Apr 20, 2020 8:42 pm

OP - if you want to speculate on oil prices 5 years from now, look up Dec 2024 oil futures contracts. They are trading somewhere around $43/bbl.

If you wanted to make a bet, it would have to be a bet that oil will be worth more in Dec 2024 than $43/bbl. NOT that it will be worth more than $2/bbl (or whatever the current spot price is).

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arcticpineapplecorp.
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Re: How can I "buy into oil" at these prices?

Post by arcticpineapplecorp. » Mon Apr 20, 2020 8:47 pm

Ah, so it's about storage. Well I would certainly store some in my basement...unfortunately, it's currently filled up with toilet paper and hand sanitizer. :P
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

Beehave
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Re: How can I "buy into oil" at these prices?

Post by Beehave » Mon Apr 20, 2020 9:35 pm

Maybe stock in Exxon or Shell?

Exxon is paying about an 8% dividend and it looks like they're trying to maintain their "dividend aristocrat" status, so it appears they will try hard to maintain that dividend. Exxon is not profitable now, but it still appears to be maintaining the dividend anyway. If you believe oil will go up, then this battleship will live to see that day and presumably will have the wherewithal and smarts to buy up oil industry resources if there are bankruptcies and mega-distressed asset sales inthe meantime

Shell is paying an even richer dividend. Shell is also investing in alternative energy much more than Exxon.

I know dividends are not a hot item to go after on this board. However, if Exxon survives and the price of the stock eventually goes up, and if until that time you are getting 8 or 9% on your investment - - that beats a lot of alternatives.

The dividend could crater,there's tons of geopolitical risk, etc. But for fun-money, maybe Exxon as a stock is a better way to invest in oil than trying to time oil as a commodity. And if something like Iran and Saudi duking it out happens and there's an oil shock,then this could be a winner and a diversifier.

Patzer
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Re: How can I "buy into oil" at these prices?

Post by Patzer » Mon Apr 20, 2020 11:58 pm

bmelikia wrote:
Mon Apr 20, 2020 6:02 pm
Patzer wrote:
Mon Apr 20, 2020 2:00 pm
bmelikia wrote:
Mon Apr 20, 2020 12:47 pm
How does one "buy into oil" at these prices? As of this post - a barrel of oil is around $1.65 a barrel.

I'm willing to toss 5k into something but USO and UGA are the only 2 funds I know of that are supposed to have some form of "tracking" of the oil price but I've watched them for some time and their price correlation is way out of whack.

Anyone else have any constructive comments of how to "feasibly" accomplish such a thing?
This is going to sound mean... but it's true.

You don't know what you are doing. You know nothing about trading oil. People that know how to trade oil are getting burned, but you think you are going to do better than them, based on what?

Just hold onto your cash.
I just think that in the next 5 years oil will trade higher than where it is currently being priced and I'm willing to be financially punished or rewarded in the future based on that investment thought. I would not put my money in an investment vehicle that would require me to "take delivery" of the commodity or anything. Just a USO/UGA styled investment vehicle if such a thing were to exist - that was the purpose of my post - to know if such an investment vehicle exists.

That is all.
ETFs that uses futures, which oil funds do, will decline over time, because there is a cost to use them and is not suitable for a 5 year investment time horizon in oil.
Each Oil fund is different. USO/UGA hold lots of futures in the following month's oil, and is not suitable for anything more than a few weeks play in oil IMHO.

USL is lower risk, and closer to what you want as it holds about 4% of it's value in oil futures for each month going forward for the next 12 months. I could see holding it for several months or maybe even a year, but not 5 years.
Additionally, the idea that oil is going to go up is already priced into the futures it holds, for example:
June 2020 futures are priced at: 21.49
July 2020 futures are priced at: 27.22
...
April 2021 futures are priced at: 34.75

So, to make a profit off USL, you would need the price of oil to go up more than the prices that those futures are already priced at over that time horizon.

The only way to bet on oil futures over a 5 year time horizon that is not cost prohibitive is oil companies, and those definitely have higher oil prices cooked in, and have others risks like bankruptcy, so they are not suitable ways to target the price of oil either.

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whodidntante
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Re: How can I "buy into oil" at these prices?

Post by whodidntante » Tue Apr 21, 2020 12:11 am

arcticpineapplecorp. wrote:
Mon Apr 20, 2020 8:47 pm
Ah, so it's about storage. Well I would certainly store some in my basement...unfortunately, it's currently filled up with toilet paper and hand sanitizer. :P
Hoard supplies! :twisted:

inbox788
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Re: How can I "buy into oil" at these prices?

Post by inbox788 » Tue Apr 21, 2020 1:41 am

arcticpineapplecorp. wrote:
Mon Apr 20, 2020 8:47 pm
Ah, so it's about storage. Well I would certainly store some in my basement...unfortunately, it's currently filled up with toilet paper and hand sanitizer. :P
I’ll rent you my basement for $1/barrel/month until December 2024. I take payment in cash, toilet paper or hand sanitizer futures.
DurangoWino wrote:
Mon Apr 20, 2020 5:59 pm
Buy USO Dec 2022 $5 calls for around $150 each. So for $5K you could buy about 33 calls. The most you could lose is your $5K but you could make much more if the price of oil goes up considerably over the next almost three years. For what it is worth those calls did quite well today in comparison to the current oil price going negative. Tells you that many folks think oil will be higher in Dec 2022. I sure do and own some of these calls. This is not investing but purely gambling. But if you are willing to flush your $5K down the toilet then I think it’s a good bet.
Actually, I think it tells you a lot of folks think USO isn’t going up by much for a long while, which is why they’re sellling it. The future contracts would need to be rolled over 30 months and the cumulative increase in price would have to overcome the contango losses. Oil prices could go up or down or futures contracts could enter backwardation.

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