Except oil didn't fall of a cliff. It was a one day fluke because of contract expirations - at 2pm tomorrow, oil will be right around where it was on Sunday.
Correct .. . Tomorrow sees a new day for oil traders as the May WTI futures contract expires. Anyone who thinks that today’s plunge in the price of the front-month oil futures contract can't happen again is solely misleading herself, though. So, I will keep owning companies that offer energy traders the optionality to play the extreme distortions in the commodities futures curve caused by ETFs like USO. https://www.forbes.com/sites/jimcol...prit-behind-oils-massive-plunge/#7d33269324e8
Well oil somehow died again in pre-market, and whoever is in on SCO, great job, just watch it closely. I expected oil to dip more but not like this, obviously it's early PM, but interesting.
I mortgaged my house to buy shares, but seriously, it's this market in a nut shell. Why buy an ETF that owns June contracts, when May contracts just went negative? There is so much going on right now that makes zero sense. I think we will retest the March lows, but what do I know, people are still buying Tesla.
The last time I heard someone this confident, it was to buy Oil ETFs when WTI went under $20 a barrel.
Absolutely agree with you, I don't know wth is going on- like absolutely no reason for the volume shift, especially at the end, pretty much sums this current market up with all the craziness. I saw someone trying to correct someone on USO but the guy flat out stated it'd open $5+ today (I can't recall where this was, definitely garbage post), haha, he's either a bag holder or hopefully messing around, because if he believed that and bought in... Yeah...
Ask yourself two questions: #1: How would you buy oil? #2: Do you know the inner workings of the instrument you're using? If you can't answer those, your answer is HELL NO.
The problem is the method to "jump on oil". These ETFs being talked about or the USO fund are not for amateurs and something I only play with on a short term basis. For a long term oil play I would go with the indivdual companies and pick the ones with the best balance sheets. I would stay away from the funds with multiple companies long term because some of these companies could be going under and one turd in the pool can limit your returns if/when the oil markets recover. I started a position in TOT as one of my long term oil plays. They have a solid balance sheet with a lot of cash to cover the dividend.
I'm neither a newbie or an expert. I don't see a good, easy play. If there was one, these crazy things would not have happened. Basically the ETFs that are supposed to track oil prices buy on the futures market. They are constantly rolling into new positions. So the problem is they now own a lot of futures at over $20 a barrel when the current price is around $12. So even though the spot price of oil will go up, these ETF are going to go down short term. Maybe short USO for day or two.
When you mess with ETFs such as USO, you also risk this: https://www.barrons.com/articles/ma...estments-as-market-turmoil-builds-51587397035 They are changing what contracts they invest in today, which completely reshapes how they lose and gain value.
Just to add to above posts and there's definitely better sources (than mine) but this details the above a bit more regarding this- https://www.investopedia.com/articles/markets/081116/uso-good-way-invest-oil-uso.asp On USO I sometimes will play cheap options - and it's honestly something I will take profits and move - ie no real movement or down unless I see something strange.., if I were investing in oil I would go with an actual company, this ETP/Fund is bad, I mean I could be wrong but I really think people bought in on some random hopes. This thing is such a mess atm that I think it'll actually hurt oil longer and/or could just collapse the fund possibly. I really couldn't understand the volume, but sadly just read that people looking to make money on oil didn't know what they were buying into and are essentially being labeled tourists. I mean the actual trade volume/inflow yesterday was absurd. I personally wouldn't invest in this one, the only regret I have is cashing a put earlier than normal but I really kind of was in shock people were trying to will this to move... So with the strangeness of this market just took profits. Anyway USO play short plays and even then at this point I question the entire thing. Again I'm not new/pro either and this isn't financial advice but USO is not where I'd put my money for any longterm plan. I mean when I move contracts I won't even hold them to expiring, I'll just get rid of them, this isn't anything I'd want to hold. And if I'm wrong and USO moons or something... Then I still wouldn't really even think "man, I should have bought this!!" - I'd more likely be thinking this market is beyond broken One more quick read detailing this - https://www.cnbc.com/2020/04/21/ret...esting-in-crude-oil-get-a-rude-awakening.html
Man, Webull account awarded me my 1 free stock, and it was Snap before the run, I didn't do research yet though... Just thought it was some nice random luck in my favor finally (even though it was just a few dollars etc.). Anyway, I haven't looked into it a lot yet. Have you? I wish I made Webull one for alt account a long time ago, interface isn't the greatest but premarket at 4 am is nice sometimes.
