Anybody taking advantage of Coronavirus?

[FireFoley]

Do you remember years ago when oil was trading over $100/barrel and not in war time and all the financial geniuses (i.e. Government Sachs) had come up with the Peak Oil Theory? The world was going to be out of oil soon, there were no more wells, no more areas of oil and that the price of a barrel would soon be $250/barrel? You can probably still find those articles, reports and predictions somewhere online. Well fast forward and everyone is now saying the best thing we can do is just leave the oil in the ground. Sadly there are going to be a lot of job losses.

 

[Detroitgator]

Do you remember years ago when oil was trading over $100/barrel and not in war time and all the financial geniuses (i.e. Government Sachs) had come up with the Peak Oil Theory? The world was going to be out of oil soon, there were no more wells, no more areas of oil and that the price of a barrel would soon be $250/barrel? You can probably still find those articles, reports and predictions somewhere online. Well fast forward and everyone is now saying the best thing we can do is just leave the oil in the ground. Sadly there are going to be a lot of job losses.

And again, add the job losses still to come when we run out of global storage space for oil/gas and pumping has to stop whether they want to or not...

 

[no1g8r]

Oh, the oddity of trading/owning commodity based ETFs. The May Crude Oil contract which expires on Tuesday just traded below $3/barrel The June price is $22/barrel. That ETF owns about 1/4 of all the May contracts so if does not want to have to deliver or take delivery of a barrel of oil it has to sell those contracts. It will then roll that money into the June and July and out contracts, and the number of shares of the USO that people own will probably go down. And this could happen again next month.

It would be VERY tempting to short the June Crude e-mini contracts, which are $21.50/barrel as I type this. The minis contracts are 500 barrels, so each $0.025 tick is $12.50. I doubt June contracts, which close May 18th, will close above $15, if that (I'm thinking $12 is most likely) due to it taking time to work through the oversupply. That works out to profit potential of over $3000 per contract. The likelihood of it swinging far in the other direction, and closing above the current $21.50/barrel price seems quite low.

I'd be tempted if I hadn't sworn off of commodities futures a few years ago, after making a few costly mistakes.

 

[FireFoley]

It would be VERY tempting to short the June Crude e-mini contracts, which are $21.50/barrel as I type this. The minis contracts are 500 barrels, so each $0.025 tick is $12.50. I doubt June contracts, which close May 18th, will close above $15, if that (I'm thinking $12 is most likely) due to it taking time to work through the oversupply. That works out to profit potential of over $3000 per contract. The likelihood of it swinging far in the other direction, and closing above the current $21.50/barrel price seems quite low.

I'd be tempted if I hadn't sworn off of commodities futures a few years ago, after making a few costly mistakes.

I have no issue with your rationale but I spent 11+ years trading commodity futures, tho not oil. But here is what I do know. Just when you think it looks obvious and everyone is in the same boat, the market has a very funny way of putting you thru an incredible amount of pain and just when you can;t take it anymore and throw in the towel, the market then goes your way. Markets can remain irrational much longer than you can remain solvent. Not saying your thought process is wrong, I have just seen the obvious not come to fruition too many times.

 

[no1g8r]

I have no issue with your rationale but I spent 11+ years trading commodity futures, tho not oil. But here is what I do know. Just when you think it looks obvious and everyone is in the same boat, the market has a very funny way of putting you thru an incredible amount of pain and just when you can;t take it anymore and throw in the towel, the market then goes your way. Markets can remain irrational much longer than you can remain solvent. Not saying your thought process is wrong, I have just seen the obvious not come to fruition too many times.

i’m there with you. I spent 8 years trading commodities futures and futures options. I got whipsawed more times than I could count. But losing in the mid 6 figures over a 2 day period when my day job had me at a “no technology retreat” was the last straw. Completely my fault for not properly protecting my positions.

 

[FireFoley]

yeah, and i'm not a conspiracy theory guy, but given what i've said about the absolute need to prop up oil, we are straying well into the area of needing a false flag (or not even false) event

FWIW the May Crude Oil contract is trading up just under FORTY ( yes 40) DOLLARS a barrel tonite and is now a whopping $1.50/barrel. It is positive, LOL

 

[FireFoley]

It would be VERY tempting to short the June Crude e-mini contracts, which are $21.50/barrel as I type this. The minis contracts are 500 barrels, so each $0.025 tick is $12.50. I doubt June contracts, which close May 18th, will close above $15, if that (I'm thinking $12 is most likely) due to it taking time to work through the oversupply. That works out to profit potential of over $3000 per contract. The likelihood of it swinging far in the other direction, and closing above the current $21.50/barrel price seems quite low.

I'd be tempted if I hadn't sworn off of commodities futures a few years ago, after making a few costly mistakes.

Good call. Less than 24 hours. June Crude futures came in about 5/bux. You could go ahead and cover your shorts and take a nice profit. Nicely done.

 

[no1g8r]

Good call. Less than 24 hours. June Crude futures came in about 5/bux. You could go ahead and cover your shorts and take a nice profit. Nicely done.

yep, would have been $2500 profit per contract. If only I had made the trade.

 

[Detroitgator]

All about the 10 yr yield right now...

The other thing right now that's a growing problem is the velocity of money, or lack thereof.

 

[soflagator]

FWIW the May Crude Oil contract is trading up just under FORTY ( yes 40) DOLLARS a barrel tonite and is now a whopping $1.50/barrel. It is positive, LOL

It's mind numbing to think that just two months ago, I was short the Feb 71 calls as part of a strangle.

 

[bradgator2]

So I had some United Technologies before their merger with Raytheon. One of the spin offs from the merger was CARR... as in Carrier the AC company. So I was automatically given some. (The other one is the elevator company OTIS)

Of course I get news articles on anything in the portfolio. There are some pretty flashy articles about CARR. A Barrons article is even calling it a once in a generation opportunity. My eyes gloss over real quick when some of these articles quickly start going over my head. Anyway... any opinions on it?

 

[no1g8r]

Oh, the oddity of trading/owning commodity based ETFs. The May Crude Oil contract which expires on Tuesday just traded below $3/barrel The June price is $22/barrel. That ETF owns about 1/4 of all the May contracts so if does not want to have to deliver or take delivery of a barrel of oil it has to sell those contracts. It will then roll that money into the June and July and out contracts, and the number of shares of the USO that people own will probably go down. And this could happen again next month.

I can't think of a single reason to buy into the USO ETF anytime soon. Since the objective of USO is to track with the daily percentage changes the spot price of WTI, they are usually buying contracts that are 2-4 months out, and in the current environment, selling them close to expiration.

At this moment:
May contracts $3.94 (settles today)
Jun contracts $14.95 (settles 19 May)
July contracts $23.08 (settles 22 Jun)
Aug contracts $25.70 (settles 21 Jul)
Sep contracts: $27.22 (settles 20 Aug)

USO is having to buy contracts in the out months (Aug/Sep) for 70-80% over the price of the upcoming front month (Jun), the month that it will be mostly selling. And the likelihood is that the front month price deteriorates faster than the out months, making the buy-sell difference even greater. Even when demand picks up significantly, the oversupply in storage is worked down, and IF oil producing countries remain steady in cutting back on production, it will be months before USO isn't buying high and selling low.

 

[FireFoley]

All about the 10 yr yield right now...

The other thing right now that's a growing problem is the velocity of money, or lack thereof.

I mentioned the 10yr in the mortgage rate thread earlier this morning potentially flirting with the all time closing low this afternoon.

 

[Detroitgator]

I mentioned the 10yr in the mortgage rate thread earlier this morning potentially flirting with the all time closing low this afternoon.

Yup, saw it... the disconnect between oil/10yr, the market, and the economy is pretty amazing

 

[FireFoley]

Yup, saw it... the disconnect between oil/10yr, the market, and the economy is pretty amazing

What a score that could have been made by buying those May Crude Oil Futures at -20, -30 and selling them higher. they eventually turned positive but unless you could take delivery it was not worth it. But man what a trading opportunity for those who had a place to take the oil if it came to that.

 

[FireFoley]

yep, would have been $2500 profit per contract. If only I had made the trade.

Guess I spoke too soon. It is 2 o'clock and the June crude contract is just above 8 bux. down 14 bux in one day. They are not waiting until the end of this contract.

 

[FireFoley]

The May crude oil contract just closed and expires today, It was up 50 BUX in one day Granted it did not trade a lot of contracts but I have never seen anything like this. Those that had to liquidate before expiration appeared to take it up the pooper yesterday and perhaps others went short hoping there would be more to come today. Oh well, it went the other way. This had to have been a squeeze.

 

[Detroitgator]

The May crude oil contract just closed and expires today, It was up 50 BUX in one day Granted it did not trade a lot of contracts but I have never seen anything like this. Those that had to liquidate before expiration appeared to take it up the pooper yesterday and perhaps others went short hoping there would be more to come today. Oh well, it went the other way. This had to have been a squeeze.

I love how some things today show oil up $46... Up to $9.

 

[Detroitgator]

Speaking of the need to prop up oil...

 

[FireFoley]

So I am thinking about the thread title and it was valid, but ever since about 3 weeks ago and the FED stepped in to calm the credit markets, I am not getting many opportunities to take advantage anymore. Since the credit markets have calmed and all the preferreds have rallied and the interest rates have been stable, the volatility has just slowed to a crawl in the stock market. Anyone finding anything out there? Perhaps we will have to wait until after all the businesses run thru their grant money and then the real layoffs start late in the year and the unemployment readings will be more reliable.Unemployment will never be 3.5% again but 20+% or whatever it is now is also not realistic.