OILU v. Crude Oil Below is chart of OILU v. CL. As we discussed the leveraged ETF (3x in this case) has serious decay issues. When oil ran to $65 April 2019 OILU ran to $35 When oil ran BACK to $65 JAN2020, OILU ran to $25. Much lower levels due to loss on rolling contracts. Go back to 2018 and you see OILU had higher swings. So we are fighting decay/loss for long term hold. So based on the two charts and my expectation (some of you would call it hope) that oil returns to $45 - $50 by the FALL I have a price target on OILU of $10-$13 to be realistic on the floor. Since I am in at an average of $2.35 across two accounts, I am ok with this price target since I loaded up.
I am looking at this long term. I cannot comment on day traders swinging like crazy. But strategic purchases of reserve oil does help oil with a boost. Stocks can rally on the short coverings but bottom line we are way oversold on news of 30 days of shutdowns of movement. Natural progression is another smaller leg down and then a base. By the time we get to May/June short term memory investors will look to the Fall and though GDP will suffer a little with these events, long term for many large companies that can recover easily looks good. As I said, by Thanksgiving....these prices will look low.
Going to be a wild week as Monday starts national shutdown day. Could see the next leg down as people try to overestimate the effect on the economy and the little stimulus gets forgotten by Sunday night. If you loaded up on long term longs....might want to ignore the screen for next 2 weeks.
I still wish you'd have bought KMI instead of XOM. Not that this will happen every time, but KMI came up over 6.5% today. XOM 2.5%. XOM is gonna stay crowded.
Accumlating Royal Dutch Shell as well. Solid diversified in many sectors, not just oil and pays a fat dividend:
Was looking at some hedges or plays in case we have another small dip. With IV so high I was not going long Puts at this moment but figured a slightly OTM SPY FLY was just the ticket: If market runs higher from here, I have plenty of longs to cover this cost and if we rumble around and chop then I can take something out of it. Strike selection was difficult but who knows....$10 wide FLY for $0.92... Debating on 250/260/270 for slight bias but my purchases right now already have slight bias.