Its funny I come across this thread. Last night I had a dream, the dream was about the price of oil. It had fallen below 20 bucks barrel. GUESS WHAT??? Oil companies were in DC asking for a bailout. I am not kidding at all. Thank God it was a dream.
chances are less than 50% to remain at $3 at Feb09 contract expiration. my estimate is Feb09 contract will lose 10 cents /day ( on average ) relative to Mar09 contract , so for 20 days ( remaining ) it is $2000 ( on top of current $3000 difference ), It may not be linear spread widens in the last week most. For argument sake let us assume spread may remain at $3 , even in that case the person who enter this spread DO NOT lose any money. I would love to enter any trade where the down side is very minimal with good upside potential which is the case of this Mar09/Feb09 Long/short crude spread. crude Trade 2 ----------------- Here is another trade I entered , I bought $45 Feb09 crude options CALL for $1400 today. I will use this insurance to to short crude for any price above $41-$43 for next 25 days, I am sure I will get my $1400 back and make some profit.
Agreed, especially on XOM. Here's an interesting article which is kind of an eye opener. http://seekingalpha.com/article/113...iant-s-real-valuation?source=article_sb_picks
Interesting article. And as many in the oil patch know, XOM's reserves have been fairly flat and not grown over the years; with the company buying back stock in order to boost earnings. Current valuation does appear rich given that we are nowhere near price levels in crude ( and nat-gas ) of last year. Also, the intangibles of oil production and exploration in Venezuela and Russia can be a bitch, especially when cash strapped countries want to be the first in line to pump ALL the oil that they can. On the plus side, I have to think that XOM hedged nothing less than 75% of its 2009 production and perhaps as much as 50% of 2010 production hedged. That is going to help "cushion" any kind of earnings decline, and won't be an absolute 50% cut in EPS as the author claims. In any event, a "compression" in the earnings multiple of XOM is certainly possible at this juncture. NOTE: CSFB says: At $45 [per barrel] oil and $6 [per MMBtu] gas (2009 curve currently at $44.25 [per barrel] oil and $6.00 [per MMBtu] gas), the stocks are trading at a 37% premium to NAV, with the gas-focused names at a 43% premium and oil E&Ps at a 22% premium. At $40 [per barrel] oil and $5.50 [MMBtu] gas (closer to current spot prices), the E&Ps are trading at a 65% premium-to-proved NAV with the gas names at a 75% premium versus 55% for the oilier names.â
Hear I am referring my old forecasts above ..... Today Mar09/Feb09 long/short spread is $4500 - the reason at that time was mainly ( before middle east issue) oil will further drop - It is interesting even oil spiked due to middle east issue still this spread today is $4500 ( $4.5 x 1000 ) dollars giving 50% profit on original investment of $3000 with very minimum risk for 20 days wait period .. 2) even the "crude Trade 2" above paid multiple times for any investor that is strategy using "option " as insurance to benefit short oil contract
Right now 25 supertankers are parked holding almost 50M barrels with 10 more tankers being added to this inert fleet and another 5 tankers to follow. Therefore is the oil price going to rise or fall? I will leave you to figure this one out. regards f9
InvestVision, Great call! Current Feb/Mar spread is at $8.20 now. I have never done spreads, but definitely interested in trying out due to good risk/reward ratio. What is your forecast for next month's roll over time? Right now the Mar/Apr spread is at 4.62. Is this a little high?