Monday, November 10, 2008

Just Bought Oil

Actually, I bought DXO a *double long* oil ETF. Bought it at $4.92 per share this morning.

I didn't buy too much since I am already long some gold stocks and the oil service sector ETF OIH.

Also, these ETFs, particularly the leveraged ones, do scare me. They aren't structured for long term investment but rather for intraday trading. As such there's been notable underperformance for the lot of them many times this year. While they may be imperfect, they are still useful proxies for small bets. Ideally, I would have bought oil in my commodities account as margin there is only around 1/8th of market value. It just so happens that I have a whole lot more *free capital* in my brokerage account these days.

This DXO hasn't even been around that long. In fact, it debuted close to the peak of the oil run in this summer. Veteran traders will no doubt insist that was a warning for an overdue correction.

Though I've been bullish on oil for some time now, I have to self-congratulate for not buying AT ALL on this drop from July's $148 top until today's bargain level of roughly $61 per barrel.


Taylor Conant said...

What makes oil a bargain right now?

Funny Circus Bears said...

Seems a bit early to be long oil for a short term trade.

I did though buy quite a chunk of XOM @ 56 bux last month for the buy and hope port.

Anonymous said...

got in at 4.34/share. I figure it is a good hedge in case my home oil bill will rise when inflation starts to kick in.

Anonymous said...

A great buy. However, it seems like you have a propensity to be *early* on trades. So, while I think this one will pay off, but not for about 7 months or so...

Furthermore, the gasoline refinieries have been cutting their activities (see the government's 'short-term energy outlook') so I expect gas (RBOB) to be quite a buy AGAIN. Unlike you, I am waiting to buy - hahaa.

CaptiousNut said...


Oil is a *bargain* in the same way that a marked-down sweater at Banana Republic is. That's all. In other words, buying it only guarantees you own it.


It does feel early to be buying oil. I just can't help myself from nibbling.


I also added today.


Obviously I got in almost 20% too early. DXO closed at $4 today. It's still a small position; I've room to add plenty more.