I'm thinking of doing a long term (multi year) speculative trade into crude oil and natural gas. What would be the easiest/most effective way to do this? With futures there are rollover costs etc and with etf's there are other costs and all kinds of risks involving bankcrupcies, regulations etc. So basically, what would be the most cost effective / risk free method of doing a longer term crude / natgas trade. Thanks!
if you just want to take a flyer buy a massive amount of CL OTM calls w/ at least a year until expiry and be done w/ it.
You can buy futures contracts that go out as far as 2020. Pick a year and a month that fits your goals. You don't have to trade the front month. http://www.barchart.com/commodityfutures/Crude_Oil_Futures/CL?search=CL*
Thank you, this is about the only sensible answer (with the option comment) There is always a premium and a larger spread in longer term contracts (and lower liquidity), I'm trying to find optimal risk/value contract - in your opinion a longer term contract would be the optimal instrument for this trade?
What is your time frame? Are you bullish/bearish crude? The answer to these will determine the strategy. Also, back month WTI is trading at a discount to the front 6-7 months, not premium. You will pay on the bid/ask spread, but June and Dec are relatively liquid and tight out to Dec 2014. Anything beyond that and the bid/ask spread is $1 or more.
You are not activity trading it, so put a bid at a place you want to buy it, if it's close to fair value, you'll get it over a time. Its a long term investment, if it take hours or days to buy it, it should not be an issue.
That's true. I'm just too deep into my usual algo "get all the cents every trade" thinking that I can't think this straight. Thanks for your comment.