Your Questions About How To Invest In Oil

Charles asks…


i would like to invest in a oil stock that has very strong fundamentals and is moving up right now , does anyone have any suggestions .also with your suggestion could you tell me how you would play it long or short , ty

John answers:

Assam company 4 shrt term

Robert asks…

Buying into Oil: How to?

I’ve noticed that Oil trades on commodities, how do I as a private investor invest in Oil?

John answers:

You can do it in a few ways…

1. If you have an investment account set up, ask your trader to buy/sell oil contracts depending on the way you see it going to trend.

2. You can purchase/short oil companies stocks like MRO, CHK, and others.

3. Open a commodity trading account online, and buy/sell there.

Steven asks…

Why don’t the middle class invest in big oil?

I’m serious Exxon Mobil (xom) and Chevron (cvx) stock are currently both in the low 70s per share. Not exactly a bid deal of money. I personally have been buying both for 7-10 shares a month since 2003 when they where both in the mid 30s and the dividends pay for a huge portion of my gas costs each year currently about 70% not to mention I have double my investment already in under 36 months (lets see a worthless Cd or money market do that). Unless you have a child fetish or a consumerist whore there should be no reason for you not to tak advantage of this opportunity and use your dividends to pay for almost all your gas( depending on how many share you have of course).

John answers:

They do, but they do not know it. Look at some of the mutual funds that many people are in and don’t even realize it sometimes.

David asks…

How do i invest into the Crude Oil Market?

I notice that the oil prices in the stock market always, ALWAYS go up and figured i might as well get into this “gold rush” since clearly there is no sight of it abating…so can someone tell me how i can go about investing into this…are there mutual funds, or specific stock picks here in Canada that i can research and invest into?

To me, it seems like more a sure thing in earning 10+%/year without any concern

John answers:

You can invest in the crude oil market indirectly (by buying shares of companies such as Exxon or an ETF that tracks these companies such as DIG) or directly. A side note is that DIG is an ultra ETF (as opposed to DUG which is an ultra-short). The ultra ETF will attempt to track the price of the oil/gas companies market by a factor of 2. The ultra short works the opposite, so if the oil sector goes down 1%, you would make 2%. By investing indirectly, you are probably more exposed to the general economy of the United States. As such, if our economy is doing spectacular and the price of crude oil rises, you will probably outperform the rise of crude oil alone. I believe this was actually the case until this past year.

However, what you are probably asking about is the more direct approach, through buying oil futures. This can be accomplished by purchasing ETFs that track the price of crude oil through the use of buying/selling futures. You can either bet for the price of oil going up, or for the price of oil going down. To my knowledge, there are no “ultra” ETFs that will provide you with a leveraged position in crude oil futures. DCR allows you to bet that the price of oil will go down. If crude drop by 1%, you would make 1%. There are 4 ETFs/ETNs that will bet for the price going up (if oil goes up 1%, you make 1%). They are: UCR, DBO, USO, OIL. USO is the most popular and heavily traded of these, and its volume was 33 million today.

When doing your homework on these ETFs, always remember to check how the current price compares with the NAV (to make sure you are aware of any premium/discount you are getting). Also, remember to check to see how accurately these ETFs actually succeed in tracking the price of oil. Hopefully this helps. Good luck.

In full disclosure, I own USO.

James asks…

how to invest in crude oil in india?

can it be possible by etf.

John answers:

Yes, buy USO (etf symbol)

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