I’m undertaking a 1000-day reinvention project, blogging here daily to track my progress. In Monday Money, I write about money management.
Commodities expert Jeff Currie says don’t trust the market’s assessment on oil prices right now:
Right now, I have exposure to oil and its derivatives in a couple ways: via short puts on $XLE, an ETF covering the energy sector of the S&P 500; via a short put on $XOP which represents a broader selection of oil & gas companies; via a long position in $PDBA (an ETF holding agricultural commodity futures); and a short put on $SHEL.
I’d like to try some other possibilities. I could invest directly in $BNO and $USO, ETFs betting on the spot price of crude oil (Brent and WTI, respectively) but these issue K-1s at tax time, which are a hassle. I could buy puts or calls or do various other options trading on them, which I don’t think would result in a K-1, as long as I always closed out the contracts before getting assigned. You can’t always control assignment, but of course if you just buy calls and puts you always have control over what happens.
The thing I’m most interested in right now is to learn to do futures trading.
Currie describes how trading futures — for example, oil futures — is different from trading stocks (or options on stocks):
Because of my brief foray into the silver market — not trading silver futures but following what was happening with them — I’m well aware of how you can blow up as a futures trader.
Still, as we likely enter a new commodities supercycle I think now is the ideal time to learn. I’m a conservative trader so I trust I will be careful with my money, as I always have been!