Wt Wti Crude 2x Discussion Threads

[silverbackalpha] 16/2/2009 14:13

Thank you very much for this Hazelton.

[hazelton] 16/2/2009 13:38

silverbackalpha , have a look for some of AndrewBakers posts in this and related threads. He is very sound on the matter. You will probably learn something.

[silverbackalpha] 16/2/2009 12:17

Can someone please tell me something:
Sorry if this has been covered before.

Does this investment have a continuous life?

Is there any sort of expiry?

Is the correlation to the oil price high, making allowance of the value of the dollah?

Does this instrument prefer contango or backwardadion, or not matter?

Thank you.

[silverbackalpha] 16/2/2009 12:02

I just bought some today :)

Looking for a nice rally in months ahead.

Thanks.

[bjed] 10/2/2009 16:28

Today is the 2nd day for the ETF rolling over 25% from March to May contract.

Looking at the range of prices today, it's been selling March contracts at between 39.28-41.80 and buying May contracts at between 48.28-50.44. That must be a record loss of barrels on a rollover!

[desi99] 08/2/2009 18:37

This etf LOIL rolls over every month
How about OSB1 or OSW1 which are 1 year etf
Are they any better than this one if I want to invest for one year
Anyone ?

[999pete] 06/2/2009 14:16

I am also in, albeit slightly above these levels. Have been day trading this over the last couple of weeks with relative success, taking a few percent each time, although may need to hang on a little while longer this time round. I can't see it getting much below these levels but then i guess we'll see. A pop back up to the $5 range and i'd be looking to exit.

[andrewbaker] 06/2/2009 13:12

Well ... sold SOIL to take profit, and bought into LOIL. OPEC cuts plus floating oil in tankers being bought plus reductions from non-OPEC producers decided me on a short(?) foray on the leveraged long side. I'm out at first sign of weakness.

[jonwig] 04/2/2009 11:50

That's backwardation, wotabore: backward-date-ation, in full, I think!

[wotabore] 04/2/2009 11:21

Is there a reverse contango where the number of barrels of oil in your LOIL investment will increase?

[bjed] 03/2/2009 16:40

desi/daza

LOIL won't necessarily drop 10-15% on the rollover dates. What will drop though is how many barrels of oil you have in your LOIL investment.
You have to sell all your March-2009 barrels for $40 (as you can't take delivery as you have nowhere to store the physical!)and buy May-2009 barrels at $46 over 5 days as in post 172. So you get 10-15% less barrels but the price of LOIL remains the same as May-2009 barrels are currently worth 10-15% more than March-2009 barrels so the net effect is zero. If the May-2009 price of oil subsequently then falls to $40 that is when your LOIL investment loses it's 10-15% (actually 20-30% due to the 2x leverage).

By May, OPEC may have the oil market under better control and the spot price could be higher or lower than $46 by then, nobody knows!

check out to see the current contango.

Dec-2017 is currently $72 so maybe that's where the price of oil is going long erm!

[daza70] 02/2/2009 19:53

ive read that from the 6th for five consectuive business days 20% of the contracts are rolled each day.

looking at the dj crude sub index tonight loil will open down about 6-7%

[grandwood] 02/2/2009 19:48

Actually looks like it's already been factored into the price with UGAS out performing CRUD over the last month or so. And now, with the expectations that the unions will do a deal, the two are heading back towards par. So maybe SGAS and CRUD are worth a go as a paired trade.

[grandwood] 02/2/2009 14:08

What confuses me is that the potential strikes at the US refineries are being touted as supporting the price of crude....surely, if the refineries are shut down, there wil be less DEMAND for crude so the price should drop. On the other hand, there will be less SUPPLY for things like gasoline so the prices should rise.

So I'm thinking gasoline futures have a better upside at the moment so am looking at UGAS and LGAS rather than CRUD and LOIL.

Or am I missing something?

[daza70] 01/2/2009 11:10

will the contango issue and therefore reduction in value of LOIL take place on the 6th or 9th and what then happens on the 12/13th?

am i right in thinking that unless there is a good rise in the spot price or fall in the futures next week LOIL will fall over 15%?

[desi99] 30/1/2009 19:27

So on the rollover dates they fall 10-15% ?
what are the dates for these ? why not short them before rollover ?

[bjed] 29/1/2009 20:42

CRUD is US Light Crude March Contract underlying index play
OILB is Brent Crude March Contract underlying index play

Both rollover to May contract week after next so will lose 15% if front month price of oil stays the same due to the wide contango :

Mar 2009 40.18
May 2009 48.66

[desi99] 29/1/2009 19:00

how can i buy underlying index instead of buying this leveraged play ?

[bobby.ifa] 29/1/2009 18:53

Thanks grandwood- most interesting, as I was intending to hold for about 9 to 12 months.

[grandwood] 29/1/2009 16:51

Trending market is fine. For example, if all the minus figures above were -5% but still +10% for the positive days then serious returns can be made on the leveraged side and actually it will return more than double the percentage return of the underlying.

But in a volitile yet basically directionless market they will not track the underlying index over the longer term.

Personally, I use these for short term plays (max 3 months) and prefer to hold underlying for longer term.

[relishing] 29/1/2009 16:46

What about a trending market though, where over time the up days are of a greater % move than the down days?

[grandwood] 29/1/2009 16:40

Not sure if it's been covered here before but a quick warning about holding leveraged ETCs over the long term (same applies to Short ETCs). All else being equal (i.e. ignoring fees, interest, etc.) a leveraged ETC will not return to its own starting price when the underlying index returns to its when measured over more than a single day. This is especially true during periods of high volatility as we have seen recently.This "risk" is mentioned in the LOIL fund factsheet:"Returns measured over periods longer than one day may differ from twice the index's return over that period"http://www.etfsecurities.com/en/updates/document_pdfs/ETFS_Leveraged_Fact_Sheet-Crude_Oil.pdfFor an (extreme) example of how this works, put 100 dollars into a hyperthetical ETC and another 100 into the equivalent leveraged ETC. Over a period of days, alternatively increase and decrease the former by 10% and therefore the latter by 20%. After day 9 the underlying investment is worth a little under 106 dollars whilst the leverage investment is worth 102 (and not 112)! On day 19, it is 100 versus 83 (and not 100). Day Change Underlying Leveraged 0 0% $100.00 $100.00 1 10% $110.00 $120.00 2 -10% $99.00 $96.00 3 10% $108.90 $115.20 4 -10% $98.01 $92.16 5 10% $107.81 $110.59 6 -10% $97.03 $88.47 7 10% $106.73 $106.17 8 -10% $96.06 $84.93 9 10% $105.67 $101.92 10 -10% $95.10 $81.54 11 10% $104.61 $97.84 12 -10% $94.15 $78.28 13 10% $103.56 $93.93 14 -10% $93.21 $75.14 15 10% $102.53 $90.17 16 -10% $92.27 $72.14 17 10% $101.50 $86.57 18 -10% $91.35 $69.25 19 10% $100.49 $83.10

[relishing] 29/1/2009 16:17

Oil price is up.

[bmw30csl] 29/1/2009 16:14

Why is this up today?

[weektraderonholiday] 26/1/2009 12:01

link to index that LOIL is designed to track... Good for keeping tabs when LOIL closes at 16:30.



From etfs website:
Investment objective

ETFS Leveraged Crude Oil (LOIL) is designed to change each day by two times (+2x) the daily percentage change in the DJ-AIG Crude Oil Sub-IndexSM (before fees and adjustments). Therefore if the DJ-AIG Crude Oil Sub-IndexSM rises (or falls) by 1% in one day, then ETFS Leveraged Crude Oil will rise (or fall) by 2%. In addition, an interest component is added each day to give a total return investment.