"Lock in" the low price of fuel

[HarmonicaBruce]

It's no secret the price of fuel is low. Not as low as it should be because it's taxed so heavily, and every time the price drops, governments rush to tax it more as they figure people won't mind it so much since the price has dropped. Anyway, UCO is an etf that tracks the price of oil. A look at the 10 year price of UCO shows it's at a 10 year low. This recent drop is the first time in 10 years that UCO has traded below $25, it's now about $16.

My biggest fear as far as inflation goes is the price of fuel. That's why I like sprinter vans, for the great mileage. If fuel were to go to $10 / gallon, I'd have to cut back some of my travel. That could happen. I can't physically store fuel, but I can "buy" diesel indirectly, by buying UCO.

If I buy a share of UCO for $16, I can sell a Jan 2016 $20 call for $2.20. If UCO is still $16 in Jan, 2016, I'll have made 16% return on my money. If UCO is over $16, I'll have made more, and if it's over $20, I'll have made $6.20, about 40% return, for 13 months. If in Jan, 2016 UCO is $13.80, I'll have broken even, and I can sell more calls. If it's lower than $13.80 I'll have lost money. But how low can it go? There are so many things that can cause oil to go up, what could happen now to make it go down more? Perhaps GM will announce that they can run a car on water, but I doubt it.

So, if the price of fuel goes up next summer, I won't mind because I'll have made so much on my UCO.

I haven't bought any UCO as of yet, I think it may dip below $16 today or tomorrow so I'm watching.

 

[Scott_1776]

Oil's going to continue to drop, talk on the street is $40 a barrel, Saudi's and US are trying to bankrupt Russia, so hold tight. Don't count on much of those lower prices hitting the pump a lot, we sheep are use to pay $3, so $2.50 looks great, when should be $1.50 at $40 (guessing before ya'll jump on the math). I like the idea, sounds like a winner, to me, if WW3 doesn't erupt first.

 

[HarmonicaBruce]

Oil's going to continue to drop, talk on the street is $40 a barrel...

It seems that every time some surprise happens, talk on the street is that it will keep happening even more. Like when gold was going up, talk was it would be $2,000 / ounce. But, it's the talk that has stopped me from buying so far.

 

[Scott_1776]

Oil is way different than Gold. OPEC can pretty much set the price. Reagan did the same thing in the 80's to crush the Soviet economy. Point is oil will go back to $100 a barrel, so enjoy while it lasts, I think it has technical reasons that will take it down more first.

 

[Dust-In-the-Wind]

Scott_1776: What would those technical reasons be?

 

[Scott_1776]

WTI has broke through all resent support levels and the next level of support for it to hit should be around $40 a barrel dating back '09 on a chart. It not my forte, commodities but it does correlate to the Forex trading I do do a lot of. It doesn't always work out, but when the fundamentals, ie. OPEC isn't decreasing supply, and sentiment from the talking heads is lower prices, and technicals saying the same thing, its probably going lower short term.