For those who was asking how oil investing works..
#From the journal #
It's great time to invest in to oil. Why? There
is no risk involved and also will give a great return.
WHY
I'm about to buy a specific amount of barels when price will reach right point.
I have $11k at a bank acc, which at price $20/b allows me to go long for 500 barels. That's also is a
leverage 1:1*
(Money managment): Position based on the fact that price will never fall under $1/b ("haha")
When price wil reach predicted $180 I will earn difference of $160, which means $160 x b500 = $80k
Theoreticaly costs will be from $100 to $2400 as a broker fees.
And then just pay %25 in taxes.
Your broker (if not very very good one
) will ask you for a margin, a sum which will support your 500 barrels position. A sum of $800 will be enought.
Interesting. Some "brokers" dont asks for a margin , trader pays loses after, ussualy, in 24 hours. And trader can just give an order to buy/sell for ANY ammount position, of oil barels for exemple. That's how people trade at so called "pits" on big exchanges.
That how works this great, non risk involved trading, this "price circle" hapens just once in "very long time".
Dont miss this time
DOnt hestitate to pm if any more questions occurs.
*in theory, of course 1:1 leverage technicaly isnt an leverage at all.
But that would be 1:14 leverage to the margin ($800)
The problem with this example is you can't just buy oil, hold it until it's expensive again, and then easily sell it. If you were buying physical oil, you would have to pay someone to store it for you, because they're not going to do it for free, and you're not going to pay to have oil shipped to you and store it yourself. So you're relegated to buying oil futures. Except oil futures aren't like securities that you can hold forever. Oil futures have expiration dates and you either have to unload them before the expiration date, or take physical delivery of the oil underlying the contract, which brings you back to the problem of storing physical oil.
So your example ignores the complexities of buying oil as it is anything but a
sure profit. If it was so easy, all the energy traders would be buying oil so fast for that
sure profit that we'd hardly have a collapsing price at all.
