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Wednesday, February 3, 2016

Inverse Crude Oil

Falling too fast.*

It seems like investing in inverse crude is always a bad time; it keeps going up, and a day after buying, it drops sharply. I might have enough to put in a few more shares at this point but no more.

My stance on crude oil going down to sub-26 still stands (at least for the next few months), particularly because of increased efficiency of getting that oil, and that no one, especially smaller companies, can keep that much crude oil forever due to storage costs (the price has even gone negative in some cases).

Then there's the possibility that even if all countries agree to reduce oil production, someone might break it to gain increased market share...

Unlike the above screenshot, I was unable to buy DWTI for whatever reason so I went for SCO (which instead has a -17% drop in this case). This is probably better since it drops less overall during a period of high volatility and they are cheaper allowing me to average down for less. I don't have the ability nor the funds to buy commodity futures / options contracts yet but I would use them if I could.

I've seen this volatility before when I had money in bitcoin a year ago so I'm used to it; unlike the former this is an ETF so I can't margin call on this one. The best bet would to be buying shares when the RSI for crude oil futures is high... and hodl.

UPDATE: On Feb 9th, crude price oil went down very quickly below 28, and I have since sold those shares for a profit noting a possible rebound.