More On Oil

This is the biggest trade I have had on for a while, so I'm following it more closely than usual. Since (as my name says) I'm a strategist rather than a tactician, I normally spend my time doing analysis rather than watching the markets. I did all that market watching when I was trading other people's' money, and I am done with that. No more monthly numbers for me!

Several people have asked me how to trade this. I am long WTI calls starting in Dec 2020 and further out. The rationale is that the market is underpricing the long-term value of crude. I don't really have a clue where the market is going to go short term, so I stay away from the nearbys.

You could also trade this with an equity of an oil producer. In this case, though I prefer the futures market. I don't know where the stock market is going to go. More importantly, if I'm wrong about crude, the downside of the distant months is maybe $10. If you are in a stock with a dicey balance sheet (as most of them are) the downside is zero. So there's that.

Here's a chart of Dec 2020 WTI vs. Feb 19:

I apologize for the poor quality. I normally use my stat language, R, to draw graphs, but this is just from Interactive Brokers website. BTW, IB is a great broker, even though their charts are only so-so. You can see that the Z20 contract (red and green bars) has held up pretty well, even if the nearby is in the pits. If we take out last Wednesday's highs, I think we are in the clear. If I were a technician, I would be adding there. But of course, I'm not. I only add on declines.

Disclaimer: This is for education only. I am not recommending anyone follow me in any trading/investing I do. If you follow someone else's trades without doing your own research, you will ...

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