Saturday, May 24, 2008

Why you should go short in Oil - I do!

Well, most people right now believe the oil price will climb more and more in the next months and years. Even though it seems not to be supported by any fundamental data. Supply and demand are well balanced right now but we see it goes more and more to the state that there is more supply than demand on oil. This is technically not a good base of facts for investing into oil.

Furthermore, we have seen a huge climb on oil over the past years which even accelerated the past months. Below is a 10 year chart of the Brent Crude Oil price indication in Euro.

It is being said: "When the last pessimist becomes an optimist you should go out of your long positions!"

I still see some comments of - so called - experts who tell us this price is too high and it will go down. So there are still some pessimistic views on the oil price which means the rally might not be over yet. However, those people are getting less and less every week. This actually leads us to the conclusion that rally is getting to its end. Perhaps sooner than later!

Fortunately, I don't have any positions in oil at the moment so nothing can go wrong for me. But I would not be me if I would not consider to take advantage of the current situation by earning some money. So to be honest: I am planning to go short in oil and get some puts on this.

13 Steps Plan to Make Money with OIL

  1. Be prepared that the oil price crash will not happen tomorrow or next months.
  2. Find a good OIL PUT Option with a longer runtime (at least 4 or 5 years).
  3. Reserve a bunch of money for this investment.
  4. Make yourself clear that you might loose all of it.
  5. Split it into 3 equal parts
    1. 1/3 for an initial investment
    2. 1/3 for a second investment (in case it is needed)
    3. 1/3 for a third investment (in case it is needed)
  6. Buy the oil put of your choice for 1/3 of your investment money, NOW!
  7. In case the oil price is climbing more, use the second 1/3 of the money to get more puts as the price for the put will fall when the oil price climbs.
  8. Repeat the previous point if needed.
  9. Patience is your Friend: Be patient and don't get nervous.
  10. The oil price will crash. Sooner or later.
  11. Your put's price will rocket boost through the ceiling.
  12. Sell your put when the oil price fell under 70 ($110).
  13. Have a nice party with your friends. They might have lost the money you just made.
Always remember: 9 out of 10 people playing (I say playing because it is playing) with options loose their money.

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