no one trading oil - why, page-51

Hi all,

first time poster.

I too was very much interested in investing in OOO given the big fall in all prices but there is a much better way of doing it. People above have mentioned issues with holding costs in OOO which are all very relevant but there is a way to greatly reduce the cost or eliminate it altogether.

The first issue with OOO is the spread. The market maker buying price is $0.16 different to their selling price so this is the first obstacle to overcome. That is just like charging 0.6% brokerage. Another problem you have, is if the price of oil does nothing for an extended period of time, the price of OOO shall slowly track lower from the management / backwardation costs.

My broker got me into trading another oil ETF in the US market and now I have little interest in OOO. Here the management fee is about the same, but the buy / sell spread is more like $0.01 - $0.03 per share so that becomes a non-issue. But the real profitability comes into play when I can make money from the price of oil trading sideways for any length of time (as it has done for years and years at a time). I write calls over the shares I own where effectively I MAY have to sell my shares later on at a higher price. I found myself making 2% -5% per month worth of income with the price of oil doing nothing! I was killing it for years and could not believe how easy it was. I am hurting a bit now because I took too much on at higher prices though.

This is how you work it. Closing price for the ETF this morning was $17.77. I buy shares at that price. Then I sell a call option over these shares where I have an obligation to dispose of them at I price I am comfortable with. I might be happy to sell those shares at $19.00 each in just 30 days time. For selling a call at that price, I GET PAID $0.58 per share which gives me an instant income of 3.2% on my investment. If its below $19 at the end of the month, I keep my shares and try do the same thing next month and get more income…

When prices bottom in the near future, they are probably not going to go up in a hurry given all the supply already out there but I think they will eventually. But I have no problems with oil going up slowly because I can often make the most money when the price does not do much. I also have the flexibility to trade unleaded fuel in the same way I do oil. Consider it…