Friday, May 23, 2008

Calling Oil's Top

As per my comments on the Million Dollar Journey, the quick rise in oil prices has created a very tempting reason to try shorting oil.

The HBP NYMEX Oil Bear+ (HOD-T) and HBP Energy Bear+ (HED-T) ETF's can help you accomplish your shorting strategy but since it offers ~2x the opposite move of the commodity / index, I still haven't figured how much, if any, I should invest / gamble in it. In any rate, if I were to short oil, it would be a short-term position in my portfolio and I definitely would have to keep a very close eye on it and place a stop loss.

Another way to bet on lower oil prices would be to invest in airline and other transportation-related stocks. As big consumers of oil, they can only only benefit from lower oil prices.

But before you place your bets on a correction in oil, please keep in mind that there's a limited supply of oil and prices will eventually be higher than they are today.

2 comments:

Ryan said...

I hope you took your own advice...

Wiser Miser said...

Ha ha, Ryan... I only wish I did!

It just happens that I took a little break from the markets and missed out on the big and rapid declines in natural gas and oil. I wouldn't short them at this point in time as the easy money has already been made (especially in N.G.). Luckily, there's still a long way to go to $10 oil. Ha ha, wouldn't that be nice!?!

Thanks for dropping by!