Oil Price Faces Another 20% Drop Due To Contango Math

USO has such a non linear relationship with crude. Intractable..it has the same problems as vxx to vix futures.... You are speculating on price and a changing roll cost/yield that is another factor of speculation as well... I'd love to see this factor quantified into a measurable risk to get a sense of what might need to be tolerated... I as well would like a longer term long position with a call option... I've mainly looked at otm calls on the actual futures contracts

 

I only wish there was an ETF to better track crude.

 

If only there was some kind of exchange tradable instrument other than ETFs that people could use to speculate on crude oil....

 

You can't take a long term view on most any commodity without risks like these!

 

What's "cheap" exactly ? Personally, I'm not real comfortable buying into a textbook bear trend line with lower lows and lower highs.

 

Why not take an expression on the degree of contango in spreads on the larger sell offs? I'm not sure there is a trade here other then just a long call or call spread a year or two out on futures.. All this etf talk is crap.. I've never heard anyone describe a model for pricing their options

 

Ehh, don't necessarily have a specific number in mind. For now I am just holding it. It is literally one spread lol. That is all I could get filled on at .32 that day. If it falls quite a bit further I will move down a couple strikes and add though. I think oil does still have some potential downside, but in general I think prices will come back up a bit by the end of the year. But that is all just speculation of course.

 

I agree 100% in terms of there probably not being a trade here at this point in time. The horse has long since left the barn and jumped the fence - and timing markets in terms of countering strong trend moves isn't personally my cup of joe.

I think the opportunities are in the distillates at this point in time.

 

Why do you think distillates look good? Are you anticipating a break out or some nice mean reversion?

 

Yes and yes. Refining capacity, margin variability, refinery run pinch points and conversions, etc. offer a lot more dimensionality in the Late Spring and Fall than Crude plays generally speaking.