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work in IB and don't know shit about trading, would be interested too
Whatever you do, don't buy USO or equivalent ETFs. Read up on contract roll, because that is what screws retail investors and will eat into gains if you plan on holding one of those funds for >3 weeks. It's been pretty entertaining to watch people get crushed by that these past 2 days.
If you really believe in a longer term oil recovery, just invest in the majors and/or some riskier E&P Cos.
why not USO? Wouldn't it rebound too
Reread the second sentence in my above post. Go read about contract roll, then re-ask your question.
Helpful. Thank you! Sb'd
Meant to post the comment below as a response to you originally:
Read into this a bit and sounds like storage shortage is going to be a rolling issue for a few months. Which makes sense why USO will keep heading down. Eventually when prices are recovering, do you think USO would be a better vehicle than majors/E&P to participate in the upside?
Also, when I was looking into the oil commodity futures ETFs I came across ticker OILK. At the surface seemed like it functioned similar to USO but OILK closed at 7 yesterday and opened at 35 today. What's the reason for the difference between the two? Am I missing something completely?
Looks like you read about supply/demand and not what contract roll is or how futures work. I guess I will spell it out for everyone. This fund is mostly meant for physical and futures traders for short term swing trading and hedging. The fund is largely made up of SHORT-TERM sweet crude futures. The oil market right now is in extreme contango - when the current contract "rolls" off, and next closest expiry contract becomes current, there is an implied roll premium. Right now it is at the highlest level in recent memory. Thus you can still lose money on USO and other ETFs even if oil goes back above $50/bbl if you hold long enough and the market remains in contango. Also remember these are contracts NOT options. You are OBLIGATED to take delivery if you hold when the contract expires. That's one of the main reasons prices went negative the other day.
This is exactly why retail investors are getting screwed; they play with stuff they don't even remotely understand but think they do. If you are bullish on commodity prices as a retail investor with no understanding (beyond a very superficial level) of energy, again my recommendation is to invest in the integrated majors or XLE.
Read into this a bit and sounds like storage shortage is going to be a rolling issue for a few months. Which makes sense why USO will keep heading down. Eventually when prices are recovering, do you think USO would be a better vehicle than majors/E&P to participate in the upside?
Also, when I was looking into the oil commodity futures ETFs I came across ticker OILK. At the surface seemed like it functioned similar to USO but OILK closed at 7 yesterday and opened at 35 today. What’s the reason for the difference between the two? Am I missing something completely?
Anyway to trade the spot price?
Unhedged E&Ps
More of a bet on OFS in the long run -- but can someone comment Haliburtons quarterly call. CEO/CFO seemed surprisingly upbeat considering clients are getting hammered. Thanks!
Tier 2 OFS and below are going to get wiped out. Tier 1 OFS and Oilfield equipment will consolidate and any sort of bet will come at the expense of E&Ps allowing for pricing increases. Free cash flow was nonexistent in the sector even in $50+ WTI. Shit, go look at margins in $100+ WTI. Been a fundamentally impaired space since 2010 really.
Look for Halliburton & FMC Technip merger, or something like it.
The contango is still pretty strong. What is your thesis on oil that makes you think the futures curve is underpriced?
The supply glut will take a significant time to unwind. Even if the world "opens up" again, I think people will still make choices to not fly or road trip to disneyworld. We really need a vaccine and significant time for people to recover from job losses/furlough. ~$34 WTI by the end of 2021 is what the contango shows. I personally think thats fair unless OPEC goes nuclear on their production (which many nations cant do, due to the funding of social programs).
But anyways, USO is your best bet unless you want to buy equities of some relatively unhedged oil producers.
What's the best way to know/assess if an operator has hedged or not? Just read the company 10-K?
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