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If You Believe The Oil Bull Market Is Over, This Is How To Monetize Your Perspective With Up To 4x Leverage
CNBC reports" Why some investors think oil's bull run is done", as excerpted:
The crude oil market has seen dramatic spikes starting with the Arab Spring in 2010 and continuing into this past June, but some investors are betting that the bull market for oil is over. "We had a situation in oil where we were in a prolonged bull market," Stephen Schork, editor of the Schork Report, told CNBC's "Futures Now," pointing out that oil started the year at $89.09 and rallied to $106.64 during the worst of the headlines out of Iraq. But he said he thinks the bull run has peaked.
"As my mentor ... taught me 15 years ago: good news, bad action," Schork said. "That is to say, the Iraq news was supposed to be good for the bull ... but instead, that trend ended shortly after—a clear tell-tale that the bull market has run its course," he said.
Crude inventories rose 1.4 million barrels last week, according to Department of Energy. That added more downward pressure on domestic benchmark West Texas Intermediate, which dropped below $97 immediately after the release of Wednesday's report. It was still trading below $97 on Thursday.
Domestic crude prices have dropped almost 4 percent in the last month and roughly 10 percent from recent highs, as traders have shrugged off geopolitical concerns and focused more on the supply-demand equation both in the United States and globally.
In fact, the International Energy Agency said Tuesday that the global market is well supplied, citing OPEC production hitting a 5-month high in July as one reason.
Looking at the historical price of oil, one can't help but notice a dramatic short opportunity right after the pop of the last economic bubble.
If one believes the central bank's bubble blowing activities teaming up with an glut have created a similar elixir for downside then you can use Veritaseum's UltraCoin client to monetize that view in near real time, without opening up a futures account or going through a conventional exchange. Download the client appropriate for your OS (Android is coming soon) as well as the quick start tutorial.
Open the client in "Live Mode" and load it with bitcoin, then search for contracts that you may want to take the other side to. If you don't find any, then populate the fiels with amount you want to put at risk (principal) and in the "Recieve" field put US dollars (ticker is USD=x) and "Pay" field you should put the "iPath S&P GSCI Crude Oil TR Index ETN" (ticker=OIL). This effectively gives you a short position on that crude oil index.
Of course, if you're bullish, you can simpy hit the "switch" button to reverse the exposures into a long position.
Below is a small sampling of the 2,061 oil related indices that can be used:
| Symbol | Name | Last Trade | Type | Exchange |
|---|---|---|---|---|
| ^OSX | PHLX Oil Service Sector | 285.81 | Index | XPH |
| ^EPX | SIG Oil Exploration & Productio | 505.78 | Index | NIM |
| ^XOI | NYSE ARCA OIL & GAS INDEX | 1,636.86 | Index | NYS |
| ^TNEP | Tortoise North American Oil & G | 896.36 | Index | SNP |
| ^SX0001GI | OMX Stockholm Oil & Gas GI | 1,004.21 | Index | NIM |
| ^NQUSB0573LMEURT | NQ US Oil Eqpt & Svcs Large Mi | 1,237.21 | Index | NIM |
| ^NQEMEU0001LMJPY | NASDAQ EM Europe Oil & Gas Lg M | 883.90 | Index | NIM |
| ^NQEMEA0001LMT | NASDAQ EMEA Oil & Gas Large Mid | 1,037.84 | Index | NIM |
| ^DJUSENT | Dow Jones U.S. Oil & Gas Total | 1,361.18 | Index | DJI |
| ^DJUSEN | Dow Jones U.S. Oil & Gas Index | 811.51 | Index | DJI |
| NLOG.NX | AEX OIL & GAS | 1,113.39 | Index | ENX |
| FSTAS0001.SI | FTSE ST Oil & Gas Index | 741.77 | Index | SES |
| AXX0500.L | FTSE AIM-ALL SS OIL | 2,522.40 | Index | FSI |
| ^NQUSS0573EURT | NQ US Sm Cap Oil Eqpt & Svcs EU | 1,093.97 | Index | NIM |
| ^NQTH0001JPYT | NASDAQ Thailand Oil & Gas JPY T | 1,016.48 | Index | NIM |
| ^NQDMEU0001LMGBPT | NASDAQ DM Europe Oil & Gas Lg M | 1,034.93 | Index | NIM |
| ^NQCA0001CAD | NASDAQ Canada Oil & Gas CAD Ind | 1,214.10 | Index | NIM |
| ^NQRU0001LMGBPT | NASDAQ Russia Oil & Gas Lg Md C | 917.74 | Index | NIM |
| ^NQUSB0001EURT | NQ US Bnchmk Oil & Gas EUR TR I | 1,173.55 | Index | NIM |
| ^NQRU0001CAD | NASDAQ Russia Oil & Gas CAD Ind | 994.13 | Index | NIM |
This trade can be done with futures as well as indices. Below is a small sample of the 1900 futures that can be used.
| Symbol | Name | Last Trade | Type | Exchange |
|---|---|---|---|---|
| CLU14.NYM | Crude Oil Sep 14 | 96.34 | Future | NYM |
| HOU14.NYM | Heating Oil Sep 14 | 2.85 | Future | NYM |
| BZU14.NYM | Brent Crude Oil Last Day Future | 102.53 | Future | NYM |
| BOU14.CBT | Soybean Oil Sep 14 | 33.57 | Future | CBT |
| BZV15.NYM | Brent Crude Oil Last Day Future | 104.40 | Future | NYM |
| CAYX14.NYM | NYMEX WTI Crude Oil 1 month cal | -0.15 | Future | NYM |
| MBM14.NYM | Mars Blend Crude Oil Futures,Ju | 100.70 | Future | NYM |
| RHK14.NYM | RBOB vs Heating Oil Swap Future | 0.02 | Future | NYM |
| CLN14.NYM | Crude Oil Jul 14 | 107.30 | Future | NYM |
| VZJ1423.NYM | Gulf Coast 3% Fuel Oil Balmo Fu | 91.99 | Future | NYM |
| MPM14.NYM | New York Harbor Heating Oil Cal | 2.97 | Future | NYM |
| VZF1414.NYM | NaN | |||
| VZQ1408.NYM | Gulf Coast 3% Fuel Oil Balmo Fu | 88.10 | Future | NYM |
| CAYX18.NYM | NYMEX WTI Crude Oil 1 month cal | -0.02 | Future | NYM |
| REBZ16.NYM | Russian Export Blend Crude Oil | 106.55 | Future | NYM |
| CAYV15.NYM | NYMEX WTI Crude Oil 1 month cal | 0.18 | Future | NYM |
| IBOU15.NYB | US Soybean Oil Futures - NYCC - | 35.51 | Future | NYB |
| CAYN18.NYM | NYMEX WTI Crude Oil 1 month cal | 0.06 | Future | NYM |
| IBOF15.NYB | US Soybean Oil Futures - NYCC - | 34.58 | Future | NYB |
| SEZ14.NYM | Singapore 380cst Fuel Oil Swap | 582.79 | Future | NYM |
If you're really feeling creative, you can even use ETFs, of which 91 oil related options are available:
| Symbol | Name | Last Trade | Type | Exchange |
|---|---|---|---|---|
| USO | United States Oil | 35.45 | ETF | PCX |
| XOP | SPDR S&P Oil & Gas Explor & Prod ETF | 74.75 | ETF | PCX |
| SCO | ProShares UltraShort Bloomberg Crude Oil | 29.23 | ETF | PCX |
| OIH | Market Vectors Oil Services ETF | 53.72 | ETF | ASE |
| DIG | ProShares Ultra Oil & Gas | 81.24 | ETF | PCX |
| OIL | iPath S&P GSCI Crude Oil TR Index ETN | 23.16 | ETF | PCX |
| UCO | ProShares Ultra Bloomberg Crude Oil | 32.59 | ETF | PCX |
| DUG | ProShares UltraShort Oil & Gas | 39.71 | ETF | PCX |
| DBO | PowerShares DB Oil ETF | 28.36 | ETF | PCX |
| XES | SPDR S&P Oil & Gas Equipment & Svcs ETF | 44.71 | ETF | PCX |
| IEO | iShares US Oil&Gas Explor&Prodtn | 91.85 | ETF | PCX |
| BNO | United States Brent Oil | 41.20 | ETF | PCX |
| FRAK | Market Vectors Unconvnt Oil & Gas ETF | 31.90 | ETF | PCX |
| DTO | PowerShares DB Crude Oil Double Shrt ETN | 33.75 | ETF | PCX |
| IEZ | iShares US Oil Equipment&Services | 71.73 | ETF | PCX |
| PXJ | PowerShares Dynamic Oil & Gas Svcs ETF | 27.58 | ETF | PCX |
| UHN | United States Diesel-Heating Oil | 31.76 | ETF | PCX |
| USL | United States 12 Month Oil | 43.85 | ETF | PCX |
| CRUD | Teucrium WTI Crude Oil ETF | 40.26 | ETF | PCX |
| TWTI | RBS Oil Trendpilot ETN | 20.40 | ETF | PCX |
For those that are extremely bearish, you can use these ETFs to build implied leverage into your trade. While not recommended for longer term trades (due to decay, read the prospectuses very carefully and you will see what I mean) short to medium term trades whose hypothesis are successfully executed can be rewarding. Let's use the PowerShares DB Crude Oil Double Shrt ETN (ticker = DTO) as an example, wherein you actually want to recieve teh DTO exposure (because that is giving you 2x short exposure to oil, and pay USD.
Now, are you even more Uber-bearish than this? Well, use your Ultra-Coin.com financial engineering chops and increase the leverage even more by recieving two times the oil short and paying 1x long. You do this by, again, recieving the DTO value stream, but paying an oil stream, say the index which we initially quoted, "OIL".
For those with true balls of steel, you can attain 4x leverage to the short side by recieving 2x short value streams and paying 2x long values streams. Remember my warnings on decay, though. From the Proshares Ultra Long Oil page:
This Ultra ProShares ETF seeks a return that is 2x the return of an index or other benchmark (target) for a single day, as measured from one NAV calculation to the next. Due to the compounding of daily returns, ProShares' returns over periods other than one day will likely differ in amount and possibly direction from the target return for the same period. These effects may be more pronounced in funds with larger or inverse multiples and in funds with volatile benchmarks. Investors should monitor their holdings consistent with their strategies, as frequently as daily. For more on correlation, leverage and other risks, please read the prospectus.
» Considerations for Geared Investing- See more at:http://www.proshares.com/funds/uco.html#sthash.qR6O5U28.dpuf
To set this trade up in UltraCoin, I would use both Proshares Ultra Oil leveraged products, so recieve (long) the Ultra Short Oil and pay (short) the Ultra Oil. It should look like this:
To produce a 4x leveraged long position, simply click the "switch" button and click new order.
Now, this is power in trading!!!
Again, I dare... No, I double dare any client of Goldman, Morgan Stanley, Merrill Lynch or JP Morgan to match the power, flexibility, safety, price or transparency of this system. Do you muppets (reference Goldman Sachs 'muppet' trader says unsophisticated clients targeted -'Getting an unsophisticated client was the golden prize,' Greg Smith tells CBS News' 60 Minutes'Getting an unsophisticated client was the golden prize,' Greg Smith tells CBS News' 60 Minutes) really think that bitcoin is a scam and the overpriced services you're getting from banks are the real deal? Well, I said, and I'll say it again... You'be been had! You've been took! You've been hoodwinked! Bamboozled! Led astray! Run Amok! This is what they do!
Well, here, we will clearly and succinctly demonstrate exactly how much that 'inevitable "robbing" of the consumer by entities that are essentially protected by regulation and seemingly immune to technological progress actually costs over time in two very simple, but information-packed charts....
As you can see from the chart above, banking products and services pricing has outstripped every consumer staple in price appreciation since the 1997 base year sans the two year period where the US put over $1 trillion in bailout aid into the industry (which essentially makes the services even more expensive, during said period, to the tax paying, savings orientated consumer)!
The chart above illustrates how banking product pricing growth rates outstrip income growth rates when inflation adjusted and normalized.
The article will illustrate how to mitigate bitcoin market risk in your trades...
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