investing in oil

[fxtrader]

You need to open a futures account with a futures broker just do a search Lind -Waldolk is one of the more respectable.

Once you have the account open call the broker and ask for quotes on light sweet crude options.

Pick the month you want and ask for a Call Option at the current market price of Oil.

So let say you think it will take 4 months for oil to go to $80 per barrel you will buy a Sept Call at the current price lets just say $50 this will cost you a premium say $4.00 per contract.

In real dollars thats $400 as each contract represents 100x.

So lets say you are right!

In sept oil is $80 your $4 option will be worth $30 (50-80)

Congratulations you just made $3,000.

[crazy canuck]

So let say you think it will take 4 months for oil to go to $80 per barrel you will buy a Sept Call at the current price lets just say $50 this will cost you a premium say $4.00 per contract.

In real dollars thats $400 as each contract represents 100x.

So lets say you are right!

In sept oil is $80 your $4 option will be worth $30 (50-80)

Congratulations you just made $3,000.



What about time decay?

[fxtrader]

The time decay will be $4.00 the price you paid for the option.

So your net return will be $2600 per option.

[DesertCat]

[ QUOTE ]
The time decay will be $4.00 the price you paid for the option.

So your net return will be $2600 per option.

[/ QUOTE ]

What's your return if oil stays at $50?

[crazy canuck]

What's your return if oil stays at $50?

-100% I think.

[stigmata]

The peaks that co-incided with the two gulf wars were very predictable, IMHO. Does anyone know about anyone making money on Oil futures (or whatever) at these points?

[Moonsugar]

Also, commodity index investing is really taking off. Several fund comapnies have funds that track commodity indices. GSCI is primarily energy so one of those funds may be of interest to you.

Interesting paper on diversification effect of commodities.

[Ass Master]

Open a brokerage account through which you can trade options and futures on the Nymex.

[fxtrader]

You will make any profit on each option that closes above the strike price in this case we bought a $50 call option which gives us the right to call Oil at $50 (we paid $4 for this right) so if when the option expires Oil is trading at only $60 your option will make you $10 minus the $4 cost to buy it so you will net out with $6 or $600 per contract.

[NoTalent]

Take a look at the oil shipping stocks. I've seen a lot of those that give very good dividends.