Shorting oil?

Would now be a good time?

bloomberg.com/apps/news?pid= … refer=home

Who’s gonna take your bet? And what odds will they give you?

Spreadbetting companies. Not fixed odds - you bet per price move. eg €5 for every $0.01 the price falls.

The article talks about demand being down a bit. But that’s US demand only (25% of global?) - it seems to be make up elsewhere.

I initially read that title incorrectly and thought it said ‘snorting oil ?’ :stuck_out_tongue:

Read another Bloomberg article yesterday, the jist of which was that once oil hit $130 it spiked up as small investors shorting oil were forced into buying to close out their positions. The analysis indicated that an inordinate proportion of short positions at the time were held by small investors.

No. Don’t be a hero. Try not to second-guess the market. Better to wait for a blowoff top followed shortly after by an unsuccessful retest. Then enter with a stop loss just above the original top.

Until then, stick with the trend.

A titanium jockstrap would also come in handy.

:confused:

translation?

The questions about whether it is time to short oil depends on whether you know the price of oil is going to fall. What do you know that the market doesn’t? Are you making a financial investment based on something you know about or is it just a punt for amusement.

The thing to remember with financial spreadbetting is that it is leveraged and it is possible to lose in excess of your original stake. A mate of mine chatted to me about an interview with a spread betting firm he was about to have. I suggested that an insightful question to ask might be whether the firm stepped into markets that were showing an overround or underround to increase their profits. The interviewer said that they hadn’t needed to as their profits mainly came from people doubling up their stakes, chasing losses.

That is just a word of caution, but I’m a conservative investor and don’t expose myself to derivatives or leverage much in my portfolio.

Out of interest, how can you have underround/overround in a spread bet?

Wouldn’t buying Ryanair be shorting oil the easy way.

A blowoff top is what you typically see on the price chart of a bubble asset as it gets ready to deflate. Over a short period, it spikes much higher in what is sometimes called a “parabolic move” , comes back down and tries to reach that level again on a second pass (the retest). It fails, i.e., it makes a lower high (usually). This is a sell signal, so you would normally enter a short position around there, and protect yourself against a loss (stop loss) by placing an order to cover your short position if the price went back to the original high - which would indicate that the bubble had further to inflate.

If you want to see many classic examples, check the internet stocks in the first quarter of 2001.

A titanium jockstrap is my way of describing a psychological attitude which inures you to the hair-raising swings and volatility bubble assets can experience during these turns as the bulls and bears struggle for dominance. :blush:

if you want to go short then all you need to do if find someone to take the other side of your bet - ie go long. And there is no shortage of them in the oil market now.

Thanks,

i think i’ll try to educate myself in the basics of the stockmarket once i have some time…

Journal reference. I can’t post the full article. In a nutshell, you end creating equivalent stakes so you can start to treat the spread bets like a sportsbook.

Journal of the Royal Statistical Society: Series D (The Statistician) 48 (3) , 435–439 R.J. Henery

Measures of Over-round in Performance Index Betting

Jeez lads. Why did I let youse talk me out of it? :cry:

Hold on a sec, the article you referenced had oil at $122 a barrel - you would have been margined out of it long before it hit $140! But if you’d looked for the blowout top then the squiggly line would have nicely intersected with the short, round line, with the sort of lump on the end in a classic “dollar-signs in your eyes” signal…

I know, I am half joking.

Only half :laughing:

I know the feeling, though. My gut feeling said that there was no way that oil prices could stay at the level they got to, never mind get higher, but all the IBs :unamused: were saying the moon’s the limit!

Two comments.

If you drive, fly, eat or or use electric power you are already short oil. IMO opinion it is worth hedging that exposure by going
long at a good level. e.g. CRUD.L

If still want to invest cash in short oil there is always SOIL.L.

In hindsight, it’s very easy to see that oil was overpriced. The price more than doubled in less than a year and with a global recession looming, oil was always going to be a casualty. With oil in collapse now, it might be worth looking at some long term oil play.