How to profit from coals demise?

Discussion in 'Trading' started by mwald, May 19, 2016.

  1. mwald


    If my forecast is that coal is going the way of whale oil but not sure of timing, what long-term investments vehicles should I look at?
  2. One of the choices is to sell short the NYMEX coal futures (ticker QL) that have a distant expiration.
  3. toolazy


    you are not serious ?

    coal fell 90 % or so and you want to short ?

    Mere retracement can get your losses 2x size of your max win in no time.
    zdreg likes this.
  4. bellman


    If everyone feels this way, then coal instruments will be over priced, and actually a good short.

  5. Sig


    Do your research before you jump into coal. Thermal coal and coking coal are completely different products with completely different markets and a 10x price difference, for example, and domestic coal is a very local and contract driven commodity.
    The politicization of coal has led to very simplistic and incorrect conventional wisdom on the subject, for example the recent coal company chapter 11s were driven in large part by the collapse of the much more lucrative international coking coal market primarily driven by decreasing steel production in China, not an Obama "war on coal" as many would have you believe.
  6. zdreg


    did you vote for obama or more to the point are have you ever been an apologist for obama?
  7. Sig


    I run a company in the power industry and happen to know a bit about coal. You? Are you disputing my assertion about the impact of coking coal vs thermal coal on the power industry or my assertion that the Republican politicians have repeatedly accused Obama of a "war on coal" that is responsible for the demise of U.S. coal companies, or just trolling?
  8. I bought BTU bonds for like 4 cents on the dollar I believe lol that's my coal play. Covered my basis plus some profit so letting the rest ride..obviously a bit against your short coal plan I guess.
  9. Sig


    To tie this back to the OPs question. Coal companies are where they are right now because of the convergence of 4 almost completely unrelated factors. First, the decrease in demand for steel, primarily in China, killed the price of coking coal. Second, the price of natural gas, an almost perfect substitute for coal in the electricity generation world, has fallen to record lows making natural gas in many cases cheaper than the thermal coal otherwise used to produce electricity. Third, the EPA has increased regulation on the mercury, SoX, and NoX which required costly upgrades to older coal power plants and there is some uncertainty on carbon pricing baked in as well. Finally the dominant players in the industry went on an acquisition spree just before the previous 3 issues became apparent, increasing leverage and decreasing their resiliency to low coal prices.
    This would argue for the idea that current prices reflect what is really bad luck for the industry that all 4 of these issues hit at once, and all 4 would need to stay in place for the industry to stay as low as it is going forward. It’s very possible that coal will eventually go the way of whale oil, but in the short term it seems that a lot of independent forces need to stay in place to keep it down. Not saying it won’t happen, but odds do seem in favor of some kind of rebound. It is important to know the industry and what kind of coal is impacted by each factor however, as it's much more complicate than something like crude.
  10. zdreg


    nice try sig. but you were not successful in your failure not to answer my question througha weak attempt to insult. you pulled an old lawyer's trick if you can't win on the facts attack the person's character.


    here again is the question did you vote for obama or more to the point or are you an apologist for obama?"

    i think we know the answer now. you trapped yourself in deep mud/ coal dust.
    Last edited: May 20, 2016
    #10     May 20, 2016