Best instrument to take advantage of oil price in SMSF

[merlinnn]

Hi Everyone,


Just curious as to what the best instrument within an SMSF would be to take advantage of low oil prices with the view that they will return to the $80 mark long term?

Any thoughts?

 

[theroyal]

Hi Merlin, Betashares offer an ETF that trades synthetically to the price of crude.
The ticker code is OOO.

 

[CanOz]

I think it depends on how much research you want to do. If i had the time i would be looking for producers that have low debt, lower Total Produced Cost, that are showing some interest from a volume POV on a daily chart.
i'm happy to help analyze some charts if you can put up some producers. Perhaps Smurf could add some perspective, being in the energy industry, or RY who may have a view. Tech/A could also give some ideas on VSA from the technical POV.

There are ETFs in the US as well, USO comes to mind. Check our SeekingAlpha.com for other ETF ideas.

CanOz

Edit"OOO is a little illiquid, USO carries currency risk. DYOR.

While its good to see some nice high volume coming in, it still does not look like its starting to find a bottom yet...No doubt the whole world is watching too though...

 

[CanOz]

Woodside is starting to put in a bottom but its been a gappy ride, with the drop overnight, it would be good to see how the price reacts on Monday.

 

[CanOz]

FWIW, CL (the WTI futures contract) is still in an unstoppable downtrend, it makes for great day trading, better than indices at the moment. I still see no reason that 50 or even $40 oil cannot be achieved at this rate...No bottom in site yet. Last night i witnessed it blow through useless long term support just under $60...

Don't rush into anything, price discovery will happen, value will be discovered eventually.

CanOz

 

[merlinnn]

Thanks for the feedback everyone. I will continue to watch over the next few weeks and get ready to pounce. I do not have the experience to trade futures and I do not think its allowable within an SMSF anyway.

I currently have everything in USD and have for the past 6 months so currency risk is not a big issue at the moment.

I will probably have to look at the index or some of the majors I guess. I just remember a thread where Tech discussed some of the potential life changers over the years like Gold, and the previous roller coaster of oil as well, hence I thought time to prepare???

Cheers

 

[CanOz]

Thanks for the feedback everyone. I will continue to watch over the next few weeks and get ready to pounce. I do not have the experience to trade futures and I do not think its allowable within an SMSF anyway.

I currently have everything in USD and have for the past 6 months so currency risk is not a big issue at the moment.

I will probably have to look at the index or some of the majors I guess. I just remember a thread where Tech discussed some of the potential life changers over the years like Gold, and the previous roller coaster of oil as well, hence I thought time to prepare???

Cheers

Agree, oil and energy plays could be a big opportunity. Whatever you decide, a good time to do quality research is while it is trying to find a bottom....

Do some sector analysis on US Stocks as well, see what's overbought, oversold etc...then look for specific opportunities from there, whether it be for value plays or technical plays, or both!

I have little flexibility with my Super, but at the moment it's 70% emerging market growth and 30% conservative growth. Given I have potentially another 17 years to retirement I can afford that balance.

Cheers,


CanOz

 

[merlinnn]

Still watching patiently on the sidelines, was very tempted to buy ooo, about 10 days ago, glad I didn't!

I have been waiting for everyone to cut production, but cannot see anything on the horizon, surely there is an agenda here or why would they keep losing money?

 

[merlinnn]

http://www.businessweek.com/magazine/content/10_31/b4189050970461.htm#p1

How relevant is this today? I notice OOO doesn't have an exact correlation to oil itself? Can anyone advise on this

Thanks

 

[hhse]

http://www.businessweek.com/magazine/content/10_31/b4189050970461.htm#p1

How relevant is this today? I notice OOO doesn't have an exact correlation to oil itself? Can anyone advise on this

Thanks

It is relevant for all ETFs that use futures to track an index/commodity. USO as per their example currently has a correlation to oil of over 90%. Reason it is not perfect is partly because of the drag associated with re-balancing their portfolio. From my understanding, ETFs have a target DTE on futures contracts that they target. To achieve this they will sell front month futures & buy back month futures to achieve/maintain this (takes time & is not immediate).

Also, ETFs that use futures will always face the issue of contango and have to sell cheap front month futures and buy more expense back month ones. All I have learnt is to not buy and hold ETFs long term due to this - short to medium term should be okay. What I would like to understand is how do these ETFs stay alive if they are what they appear to me as - eroding assets? Because some ETFs face constant contango and little backwardation. i.e VXX. Do they get some sort of fee/commission from exchanges etc that outweigh this loss?

 

[hhse]

..All I have learnt is to not buy and hold ETFs long term due to this

Just to clarify, I'm referring to those ETF's that use Futures to mimic underlying, not those ETFs that hold actual underlyings.

 

[merlinnn]

So how does one find non synthetic ETF's to invest in commodities?

 

[John Swift]

Hmmmm. Many oil producers partially or fully hedge their production for 6 to 18 months - this may be why they are slow in cutting production... and why fuel prices are taking their sweet time to get sub $1.

But this is an opportunity in that if the oil price remains low for the next, say, 12 months, then some of these oil producers will start to be in some financial strife. You may possibly want to do some research into which of the larger players have the balance sheet to gobble up some good distress sale assets.

I'm thinking... the big oil companies that seemingly missed the boat on shale oil may want another bite of the cherry if oil prices can remain low for another 6 months to a year. Then if/when oil reverts to the mean, those valuations will start coming back quickly.

 

[christianrenel]

If you are looking at gaining exposure to oil price with an ETF the following ETF maybe able to help

OOO- Betashares Crude Oil (Future Contacts)
MVR - Market Vectors Resources - (Is not index weighted therefore does not hold a large postions in BHP and RIO, but rather mixture of ressources companies).

Kind Regards


christianrenel