Official (Alberta) Oil Discussion Thread

[Slava]

Originally Posted by cracher

So who else has been following oil with HOD in the last while?

More importantly, with all the knowledge in this thread, when should one take a monster long position? (and, by long, I mean the leveraged HOU - so not long at all in a temporal sense)?

I know that this probably isn't the right thread for this, but you should be very careful with ETFs like HOU. You have to understand the math and consider that they rebalance daily. What the means is that if oil goes straight up or down for a while, you're golden (depending on what exactly you're doing). If its volatile though, you're in trouble. So if oil goes from $30 to $100 in a nice straight line, you hit a massive homerun on the right side of the trade. If it goes from $30 to $100 but with a lot of volatility on the way you could well wind-up losing money. It's not as simple to say "oil is cheap, I'll double-down here using this leveraged product".

[Frequitude]

Interesting, didn't know that Slava. So if I buy HOU or whatever the 2x is and oil goes from $30 to $50 in a volatile fashion then $50 to $30 in a volatile fashion I might end up losing? Is there the same probability that I end up winning still (i.e. is the math symetrical)?

[Slava]

Originally Posted by Frequitude

Interesting, didn't know that Slava. So if I buy HOU or whatever the 2x is and oil goes from $30 to $50 in a volatile fashion then $50 to $30 in a volatile fashion I might end up losing? Is there the same probability that I end up winning still (i.e. is the math symetrical)?

Well the issue is that every day starts at "zero". So the most glaring example goes back to people using these leveraged ETFs for gold in 2008-09. Gold was relatively flat, I think only down like 2% or something over the year...so not a big deal. But both the leverage up and leverage down mandates lost money because of the volatility. They're quite path dependent if that makes sense.

There are actually a number of dealers (investment dealers) who won't allow their use because they're quite misunderstood. The other thing to consider is that the average holding time for these mandates is something like 3 days.

[darklord700]

HOU is 200% leveraged. So day 1 oil is $30 and loses 10%, HOU will lose 20% or $6.

Day 2 oil start at $27, if you gain 10%, HOU gains $2.7X2=$5.4. So day 1 and 2 combined you still lose $0.60. Is that right?

[ranchlandsselling]

Originally Posted by darklord700

HOU is 200% leveraged. So day 1 oil is $30 and loses 10%, HOU will lose 20% or $6.

Day 2 oil start at $27, if you gain 10%, HOU gains $2.7X2=$5.4. So day 1 and 2 combined you still lose $0.60. Is that right?

While a good thought, that's the same with any equity.

If day one apple goes down from $100 to $90 (loss of $10 or 10%)
Day two apple goes up 10% you're back to $99 and you've lost $1.00 even though you've had one 10% down day and one 10% up day.

There's also fees involved in the management of these leveraged products which eat into returns.

[heep223]

Just use your own margin and buy the non-leveraged product if you want leverage.

There are other issues with using futures-based ETFs, the ones that roll forward the front month contract will always see a small erosion of value every month.

[Enoch Root]

Products like HOU, with very large turnover, have significant headwinds with respect to transaction costs and the bid/ask spread. From costs alone, Slava's gold example is not surprising.

[Bend it like Bourgeois]

the tail end of this article is interesting. When oil comes back, it seems to roar.
(Makes me chuckle too that he wrote 'might' but the headline of course says 'will')

http://business.financialpost.com/ne..._lsa=4434-c4da

He tweeted a graph of the same here.
https://twitter.com/trivestwealth/st...30016693555200

[Hack&Lube]

I hear people talking about trading HOU/HOD randomly in the elevator but I honestly have no idea what it is. Where can I learn about these things?

[BigNumbers]

I trade UCO as well - same idea.... What I like about UCO & SCO are the ability to trade them in premarket or afterhours which you don't have that on HOU.to and HOD.to

[cracher]

Originally Posted by Hack&Lube

I hear people talking about trading HOU/HOD randomly in the elevator but I honestly have no idea what it is. Where can I learn about these things?

Grey Eagle casino is a good place to learn. It's essentially the same as putting a stack on red/black.

To me, it's the same as gambling. I have lunch regularly with commodity traders (the speculative guys) and their schedulers. If one of them jumps to pick up the tab, I buy HOU/HGU. If they mostly delay and hedge until I pick it up, I buy HOD/HGD.

[Slava]

^ Its not the same as the casino though because there if you put your chip on black and the ball lands on red, you lose the chip. Here you put the chip on black, ball lands on red and you lose double. Then the math works against you and whether you were "right" and that commodity rose/fall you still lost. Its something that almost no retail investor should be using. Realistically its useful for day traders or hedgers who are into these complex instruments.

[BigNumbers]

Whitecap dividend is cut 40% and capex down 53% from what they guided too just one month ago.. It's a bloodbath, officially.

[heep223]

Husky just cut their dividend. By 100%.

[Leeman4Gilmour]

Originally Posted by heep223

Husky just cut their dividend. By 100%.

According to their dividend history listing, that hasn't happened before

[driveway]

Projection of the increase in Iranian oil production with the lifting of sanctions:

http://www.eia.gov/todayinenergy/detail.cfm?id=24592

Iran's crude oil production has been relatively flat over the past three years while sanctions were in place, averaging 2.8 million barrels per day (b/d) in 2015 ...
Iran's annual average crude oil production is forecast at 3.1 million b/d in 2016 (10% of projected total OPEC production), and almost 3.6 million b/d in 2017. ... Most of Iran's forecast production growth comes from Iran's preexisting crude oil production capacity that is currently shut in, while the remainder comes from newly developed fields. ...
The pace that Iran will ramp up its exports now that sanctions are lifted is uncertain. Iran has a considerable amount of oil stored offshore in tankers (between 30 and 50 million barrels), most of which is condensate, and crude oil stored at onshore facilities. Initial post-sanction increases in Iranian exports will most likely come from storage, while meaningful production increases will occur after some of the storage is cleared.

[chemgear]

http://business.financialpost.com/ne..._lsa=fb0b-a9c6

Canada has lost credibility as an investment destination because of its inability to build export infrastructure, a recently retired senior executive at China’s CNOOC Ltd., one of the country’s top three oil and gas companies, said Tuesday.

After spending $35 billion in Canada’s energy industry when oil and asset prices were high, Chinese energy companies are reeling from the oil crash and cutting jobs and investment. China Investment Corp., the country’s sovereign wealth fund, shut down its Toronto office last month.

After spending $35 billion in Canada’s energy industry when oil and asset prices were high, Chinese energy companies are reeling from the oil crash and cutting jobs and investment. China Investment Corp., the country’s sovereign wealth fund, shut down its Toronto office last month.

“The federal government (in Canada) is a weak government, not like China in comparison,” he said. “Most resources are located only in Alberta … and Alberta is an inland state, they can only transport to the U.S. You go to Pacific, you have to negotiate with B.C. and B.C. has a lot of First Nations. I participated in three (annual LNG) conferences. They continuously talk about First Nations issues. I didn’t see any progress.”

[CampbellsTransgressions]

We live in a spoiled country where our wealth is taken for granted. Most Canadians want a social safety net and public health care, but many do not want to keep doing the things that allow us to pay for them.

It's nice to see a sane view from an outsider, because all we seem to get within our own country is insanity.

[_Q_]

Honestly... I think our O&G industry is done for good.

[Mr.Coffee]

Originally Posted by _Q_

Honestly... I think our O&G industry is done for good.

No, and with this attitude you'll miss out on an eventual excellent investing opportunity.

Nothing stays up forever, nothing stays down forever.