UCO purchase

[LivingAlmostLarge]

in 2013 when oil went off the cliff we lost 6 figures investing in UCO. My DH did that. After that he went into ETFs and boring buy and hold strategy. I decided I didn't buy at the "lows" last month of JETS, Carnival, etc I think April will be a bad month. But I pulled the trigger and bought 500 shares again of UCO which is a 2x oil index. I don't know if it will make it but it was $800 this time and I'll watch stuff for the next month.

He used to play UCO and the inverse SCO. Oh man that was bad. He used to play the $40-100 barrel window then it went way down and he kept buying on the way down. Truth is that it would have hurt if we had stuck in it.

[disneysteve]

I was thinking about that too. You know the industry will recover eventually.

[disneysteve]

Wow. It’s down over 92% YTD. That’s incredible. And it isn’t investing in specific companies, just oil futures, so I don’t think it’s possible for it to go to zero, right?

[james.hendrickson]

Thoughts on this:

I've got a small position in Exxon Mobil. Its getting hammered. The price this morning was at something like 37 dollars - it used to be a $60 to $80 per share company. So, its not just UCO, the entire oil patch is getting hit. Importers, refiners, distributors, etc.

The key question is why?:

1. Supply is up. Saudi Arabia is releasing more and in the US internal production has increased over the past few years.

2. Demand is down. With the globe shutting down to combat the coronavirus, people aren't driving as much. This has a huge impact in populated countries like India and China who account for a big chunk of global demand. Here in the US several refiners are saying they'll be forced to shut down production due to declining demand.

I found a good Barron's article on this describing whats going on => here.

[bjl584]

I have a fairly sizable position in BP.
I've been thinking of picking up more.
The shares that I do own were purchased during the deep water horizon spill.

[LivingAlmostLarge]

I have a tiny position in Exxon Mobil for the dividend. I'm debating buying more. I could use more dividends

[greenskeeper]

I'd be interested in a historical chart with oil prices and UCO versus SCO performance to decide when to go long (UCO) or short (SCO)

Although the current market seems to point to only go up (at some point, even if it drops further....$20/barrel in 2020 is crazy)

[Scallywag]

I was thinking about that too. You know the industry will recover eventually.

I don't know. Electric & hybrid vehicles are becoming more popular but oil should be good investment for about 10 years at most. Saudi Arabia actually purchased a large stake in TSLA that they unfortunately dumped just before its meteoric rise in Jan so the Kingdom will be looking to buy again now. It also tells you a lot when such a large oil exporter takes a huge stake in an electric automobile maker. Just saying.

[LivingAlmostLarge]

maybe but I don't see us going off oil dependence for quite a few more years.

[rennigade]

my coworker just set up options for UCO.

$2 Put expires 4/9 - 5 Sells

and

$6 Call expires 7/17 - 50 buys

He said if it goes up to $6, he'll have the rights to $30,000 worth. Im still not sure what that means. Does anyone trade options?

[kork13]

I've never fully understood options....so no, I've avoided them.

[disneysteve]

I've never fully understood options....so no, I've avoided them.

Same here.

[Scallywag]

Lol. Thought I was the only one who couldn't "get" / understand options! I've stayed away from them, too. How do they work?

[greenskeeper]

Everything I've read about uco says it's not to be held longer than a day due to the 2x spot for gains and losses. That being said you can't purchase uco through vanguard and i missed out on a 33% gain today, so I'm looking for a brokerage to be able to buy some and play around a bit.

[LivingAlmostLarge]

He can buy UCO by 4/9 for $2 and lock in gains until then. But then he is also hedging that it'll be more by 7/17 than $6 and the rights to buy at $6 a share. Maybe it'll be worth a lot more. He had to put up the cash at the price now and take a slight hedge.

Did I mention that this time I only stuck $800 in UCO because last time we lost 6 figures playing and shorting it with SCO? 2x gains and losses made for big gains. So I admit we probably made 6 figures from our initial investment too. I almost put in $1500 yesterday but chickened out. I'm going to wait and see. I can't do calls and puts it's too hard for me to watch and pick predict prices.