If I had balls, I’d short the shit out of DWTI

Look at the graph below:



See something striking? Some kind of repetition, maybe?

Everyone knows oil will move higher - eventually. I mean, just look at that crash from $230 to what, $90? That’s a 60% gain if you’re shorting in something like a week. At $207.36, you are pretty much guaranteed that any little rise in oil price will annihilate this fund.

Say for example oil kicks from $36 to $41 monday for no reason. I don’t know, war in Syria, some strikes at some part, whatever you want it to be. That simple $5 rise would crash DWTI by half. You read that right: a $5 rise would crash DWTI to the $100 or so. A 50% profit if you are short DWTI in mere days!

Even if oil keeps crashing, one has to wonder how long. Oil is basically so low production will crash very quickly everywhere in the world except for OPEC. Russia will not do more oil projects with oil so low, Canada will not do more oil projects, USA will not do more oil projects… Eventually, the production will nosedive, especially with quickly- exhausted shale oil wells, and oil will soar. I mean, you don’t even need a big soar to make money shorting DWTI - a simple 15% would crash DWTI by 45%.

By shorting DWTI today, you are taking very little risk for a HUGE payoff. Sure, oil could keep crashing, but everyone knows that sooner or later, it will go back up. Like it die the 20+ other times it crashed. Unless we never need oil ever again, $40 oil is not sustainable. We simply cannot produce enough oil for the planet at this price.

If you have at least a 2+ years horizon, short DWTI today. It WILL go back to $75. Look at the graph above. A rise from $40 to $50 made it plummet from $230 to $75. Imagine a rise from $36 to $46. And it’s not like it cannot happen: it happened plenty of times before. And I’m not even talking about the decay on DWTI.

To me, shorting DWTI looks like a no-brainer at this level. If you have some risk appetite and can digest a rise to perhas $240-250 (at which point you would short more), then shorting DWTI is an outstanding way to profit. I mean, even if oil doesn’t recover, you’ll make money from the decay. Your only risk is oil crashing lower, but how much lower? Projects are being cut left and right, meanwhile the population keeps growing and the demand will keep rising. Look at the graph and how it spiked to $200 or so many times, only to plummet right after.

No brainer. So why don’t I do it? I honestly don’t know. I guess I’m kinda done with that kind of trading. But if I wasn’t, I’d short DWTI in an instant. To me, easy money: while people panic, stay calm and do the obvious.

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10 Responses to If I had balls, I’d short the shit out of DWTI

  1. Meester Pro December 13, 2015 at 7:29 pm #

    Good insight FSC. I agree with your general premise, but I’d rather trade CL. These 3x ETNs can be pretty volatile for such a long time frame. Any idea what the borrow rate is for DWTI? IB’s not showing it outside of RTH.

    We hope to see you back livestreaming soon! Let me know if you need any help.

    • F.S. Comeau December 13, 2015 at 7:31 pm #


      I’m mostly working these days and not into finance anymore. I have stuff going on in my life and streaming/daytrading is totally at the back of my mind. If I were to stream, it would be something like chess or video games.

      I won’t say that I don’t miss daytrading. I do. But recent events (including my VXX short which almost bankrupted me!) have convinced me to stop trading and focus on other aspects of my life.

  2. Lee January 4, 2016 at 7:30 pm #

    Why not just buy UWTI?

    • F.S. Comeau January 5, 2016 at 2:23 am #


      I would NEVER hold any triple leveraged ETF for anything over a week (at most).

      Shorting DWTI implies paying a borrowing fee, but to me it’s 1-2% per year. UWTI’s decay is 10-15%+ !

  3. Karlus January 10, 2016 at 2:37 pm #

    For even more balls, buy option spreads on UCO (calls) or SCO (puts)

  4. Juree-san January 25, 2016 at 8:15 pm #

    Depending on how much leverage you used, if you had gone short at the time of posting, you might very well have gotten a margin call.

    Sounds like market timing isn’t your strong suit.

    • F.S. Comeau January 26, 2016 at 10:14 am #

      Are you trying to tell me an investment carries risk? What a totally novel concept! I never heard of this idea before. Thank you for opening my eyes upon a new world!

  5. Sean February 14, 2016 at 8:41 am #

    It climbed to $480…. margin call indeed. Be glad your balls were small lol… the boys with the big balls got them removed and jammed down their throats on this play. Holy hell… that’s a shorting nightmare. From a TA point, that was a nice set-up though, hard to resist and would have even made a little money on a quick scalp.

  6. Nate K February 16, 2016 at 4:35 pm #

    Great premise and article. I stumbled upon this today: http://www.fscomeau.com/studying-dwti-decay/ and I’m actually amazed to find someone else who came to the same conclusions I did recently. Going long UWTI is a suckers game while selling DWTI is a no brainer with decay involved.

    Nice to see some good analysis and research, hope you get back into trading because it’s obvious you see what others aren’t looking for.

  7. Oliver June 23, 2016 at 10:53 am #

    Checking in 6/23/2016,
    It’s Down to $70.88 today. 6 months ago it was $480 as Sean above said. That’s a lot of money someone could have made

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