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.