How did I miss this gem of a thread? Seriously funny stuff here. Please carry on.
I guess I don’t understand the fascination with levered ETFs (other than for a day trade), as Ohai mentions they have peculiar behavior long-term. Best ETFs I’ve found for oil are USO and USL (slightly different characteristics because of how they roll their futures). Never actually owned them, but have been researching in case we see a crazy low this year.
Some of these large, integrated oil majors are going to have a tough time growing their reserve bases if oil is going to be $55/bbl. They were spending tens of billions of dollars annually and were hardly growing the reserves after production, and that was when oil was above $80/bbl. Just one example, Royal Dutch Shell spent $114B over the last three years and still couldn’t offset reserve losses from production (by a significant margin). Think about that…$114B in capital out the door and you still shrunk. What a tough business. These companies will benefit from cost deflation on the services side, but its still gonna be a grind. These companies had a hard time growing their reserves when oil was $100/bbl…now try to offset your production finding economic projects at $55/bbl. Best hope is probably buying companies on the cheap.
On another note, levered ETF’s are a terrible idea. You’ll probably lose money long-term even if your call on the commodity price is correct.
I´m totally agree with you. And I think the short view have higher probability in comparison with the other one.
Let me see if I understand your statement - you are saying that even if you had a crystal ball that told you exactly how commodity prices were going to move, you wouldn’t be able to figure out a way to make money with levered ETFs. Is that what you’re saying?
^ Yes. Look at UCO from Feb 25, 2011 to Dec 31, 2011. I only choose Feb 25 b/c that’s when it did a 1:4 split, its not an arbitrary date
On February 25, 2011, WTI was $95.26 and UCO was $50.09
On December 31, 2011, WTI was $99.81 and UCO was $40.94
Go figure. These are terrible assets to hold over time. Periods of high volatility result in significant decay of value.
Not only that but WTI spot (Sept 2015 contract) is $46.09 and futures prices are considerably higher. The WTI Sept. 2016 contract is $52.00, so you’re going to have a negative roll yield when monthly contracts roll over.
If you’re bullish on oil prices, I’d buy an oilfield services ETF (NYSE: IEZ). A lot of the constituents in the services index are highly leveraged to oil prices right now. There’s a lot of operational risk unique to specific companies in this industry, so an ETF mostly avoids that.
No one is saying you can’t make money using levered ETFs. What they’re trying to get through to you is that the longer you hold on to them the more likely it is you’ll underperform the underlying asset. The only way a 2x or 3x ETF works well in the long run is if the commodity (or whatever the underlying asset is) moves in your direction with very little volatility.
Practically speaking, it’s extremely difficult to make money using levered ETFs if you’re holding on to them for more than a few days. Someone holding a levered ETF for more than a month and is still in the black is lucky, not good.
If they were really good - as in they had amazingly strong conviction in the movement of the underlying - you’d by calls (or puts) on the levered ETF like I did here: http://www.analystforum.com/comment/91290652#comment-91290652
I also used levered ETFs to make a few dollars earlier this year when silver was trading in a very predictable pattern. Basically bouncing from $18 to $21.50. Not really worth it to just buy SLV, so I’d use AGQ (or USLV) on they way up and their inverse siblings on the way down. Worked well right up until the chart broke.
On a side note, you seem rather defensive about, well, everything. Most people here are offering you good advice. That’s why you created this thread, I assume. No need to be a dick. You’re Canadian after all. You guys are supposed to be nice.
You’re the dick. I never asked shit about levered ETFs, and if you guys say wrong shit i’m going to call you out. Also, the thing you’re saying is not the same as “you’ll probably lose money even if your call on the commodity price is correct”. That’s not even remotely the same thing as what you said. If you want to interpret me calling out people saying wrong shit as being a dick, then go for it. I asked what people think oil is going to do within 6 months. You don’t like levered ETFs? great, don’t use em, I could care less. You want to agree with wrong shit like “even if you know which way commodities are going you’ll lose money using levered ETFs”, that’s your business, I don’t care. I asked what people think oil is going to within 6 months and some reasons. I don’t care what you think about levered ETFs. I don’t know how much simpler I can explain it.
I’m not bullish on oil prices… and you’re data mining to reinforce a point you have already convinced yourself is correct. I don’t give a shit what you think about levered ETFs, I asked about what people think oil will do in the next 6 months. Will everyone please shut up about the ETFs.
Huh, if I came across like a dick, my bad. It was unintentional. You posed a question, which I quoted, that I thought required an answer. If you didn’t want to talk about levered ETFs, why did you ask the question to begin with? If you haven’t noticed, this thread has evolved passed your original post. Or, perhaps devolved is more appropriate.
I’m guessing you’re probably, what, 24? Have fun speculating on that $2,000 kid. Sounds like you got it all figured out.
I say this in a very “matter of fact” and non judgmental way. This is just my observation (I say matter of fact things like this, as people here will probably agree).
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You’re a noob. You have a $2000 investment account. You have no legitimate trading or investing experience. When people like bromion take the time to talk to you, you should bow down to them.
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You are insecure as well. That is why you are over defensive and lash out at people who provide feedback on your trades. Furthermore, insisting that you are correct is a noob habit. Seasoned people are used to taking losses. Everyone loses money sometimes.
3 You did random crap and got random PnL. You had an opinion then changed your opinion with no additional information. This made you over confident.
- You’re being a dick to people here. This is presumably derived from your insecurity as stated above.
I recommend a timeout so that you can perform a self evaluation. This will help you become a better investor and perhaps a better person.
I think you might have me mistaken for someone who gives a shit what you think.
That’s ok. By that, I mean it really is. I deal with much worse people every day - I would not have survived this long in my job if I could not do so. So I basically have no emotional reaction whatsoever to angry responses. I do enjoy writing stuff on AF, as most of the people here are fun and teach me new things. I’ve posted over 10,000 times, so even talking to you is just routine. It is part of my existing behavioral pattern.
However, you only seem to post on this thread. It’s an abnormal action for you to respond to people like me. So in fact, you care about what people here are writing - at least enough to alter your behavioral pattern and respond here. In some ways, I am happy too as it shows you care.
I don’t know what you’re so mad about. People are trying to inform you so that you don’t lose money.
The ohai-bot has become self-aware. Someone shut down Skynet immediately.
dood… I never asked shit about levered ETFs… I don’t know how this whole thread turned into a conversation about them, all asked is what people’s view is on oil over the next 6 months, and happened to mention that levered ETFs was the vehicle I was using to make the play.
I haven’t seen much in terms of oil comments, just condescending patronizing bullshit about these ETFs, and then an attitude that I’m supposed to be thankful for hearing it. The irony here is you all - bromion, and names I forget and can’t be bothered to look up, keep patronizing me and saying shit in absolutes. It’s arrogant and incorrect, and maybe your buddies on bay street or wall street or watever eat that shit up, but I like shades of grey, and there’s more than one way to skin a cat. I never said Levered ETFs were awesome, but they’ll give me the return I’m looking for if oil keeps moving. Also I don’t have an options account, which is why puts and calls are not an option for me. Furthermore, you guys have destroyed your credibility by saying wrong and biased things to support your arguments. One guy said “you should avoid levered ETFs under all circumstances” or some shit like that, kind of on par with the “you’ll probably lose money even if your call on the commodities is correct”. How the hell would you lose money if your call was correct? Both these statements are so wrong, that it doesn’t give me much incentive to listen to any more of your “pro” advice. DWTI is up over 90% since beginning of last month. Clearly somebody’s made some money on this thing, which annuls both the statements that were made. If you want to talk probabilities and base rates, that’s a more rational conversation, but don’t present me with absolutes that are clearly wrong, and then tell me I’m a dick when I call you out on it.
Thanks for your concern. I’m up $1200 on what was just under an $8000 position a couple weeks ago, so I think I’m ok.
^^I didn’t do any of that. Thanks a lot. I hope you enjoy hurting the feelings of helpful strangers. Damn it. I haven’t cried at work in weeks.
Nope. don’t care. you can fuck off now.
We’ll just agree to disagree then I guess