Tradeplan for a $100 oil price forecast

Casss

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Hi,

I'm a newbie here, having read the FAQ's, yet not clear what to do.

My assumption is that oil will drop to $100 in 2009.

How should one trade to make a profit on this?
Basically, I do not want to make too many trades. Not more than one trade a month.
I've got about US30000 to invest in oil futures on NYMEX, using InteractiveBrokers.com.

Should I go short? How exactly does that work? What about margin requirements? What obligations will I have until I cash?

Any help appreciated. Sorry for the newbie level of my question.
 
why are you making that assumption? the market will do whatever its going to do, but there seems to be more reasons for oil to go up than down in price.

$30k only gives you around $25 wiggle room in the futures price of oil. So if Oil hits $170 a barrel, you'll be down $25k and receiving a margin call if you were short on one contract.

buying OTM puts fixes your risk, but of course you have a fight against theta.
 
Thanks

> $30k only gives you around $25 wiggle room in the futures price of oil.

How exactly is this calculated?

> but of course you have a fight against theta

What do you mean by that?
 
An excellent primer is "Options Plain and Simple" by Lenny Jordan isbn 0-273-63878-5

Do NOT dabble in anything until you really understand it. Otherwise you WILL lose money.

Richard
 
1 futures contract is on on 1000 barrells so with margin 30k is about 25 dollars move.

Theta is time decay in options.
 
Thank you. Yes, I won't trade anything before I absolutely understand what I'm doing.
Of course, my assumption of a lower oil price is debatable. But let's not do that now.

It would be safer to assume a $100 oil price in 2010, rather than 2009.
How is this lower risk reflected in the Future contract price?
And are contracts for oil-delivery in, say, July 2010 actually traded, or is this date too far in the future?
 
Thanks. Appreciated.

What exactly does "M9" and "[30]" mean in the following quote (Light Crude options):

CL M9 [30] LIGHT CRUDE OIL Jun '09 09:39:54 142.50
 
please, please, please do not trade oil with your current level of knowledge.

please.
 
Cass,

Oil isn't going to fall to $100 anytime soon. So why don't you open a demo account somewhere and learn how to go about what you want to do? You won't miss out during that time and you will be in a much better position after that to make your judgement.
 
that is an excellent suggestion, open a demo and trade and see what is happening.
oil could dip to $70 next year, thats not the issue, people go bankcrupt trading like that, because markets only turn when they have taken your pot of money and has placed it within those didnt go bankcrupt.

I think its @114 anyways, so no point trying to take risk for a $100 move, because it can well bounce back to $125 before it falls again.
 
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