The Everything Guide to Commodity Trading by David Borman

Author:David Borman [Borman, David]
Language: eng
Format: epub
ISBN: 9781440536229
Publisher: Adams Media
Published: 2012-07-15T00:00:00+00:00

Trading Oil ETFs and Leveraged Oil ETFs

You can also get into ETF and futures trading if you want to build a position in crude oil. Of the two, buying and selling oil-based ETFs is the easiest and the simplest. If you are building a commodities position in your investment portfolio and you are doing so by including different layers of assets, then you should make sure that a larger percentage of those commodities assets are oil-based.

You may choose to have the core of your commodities portfolio be a broad-based commodities ETF or mutual fund. You could then amp up the returns of this core portfolio by going long and buying bull oil ETFs. You may even have a core portfolio of ETFs that you are slowly adding to over time, but you are “trading” the leveraged bull and bear oil and gasoline ETFs. These leveraged ETFs are perfect for daily trading. They offer 2× and 3× leverage as compared to the regular ETFs. This means that if you buy a bull 3× crude oil ETF, you will make three times the upward percentage of crude oil’s price. In other words, if crude oil is really on the move, and goes up 2 percent in one day, then your 3× bull ETF will move up three times as much, or 6 percent, and a 6 percent gain in an ETF is a healthy profit, to be sure. Another thing to consider is that these gains will come from oil and not from trading some newbie or high-flying stock that may be “here today and gone tomorrow.” Oil is a key component to the world’s economies; in fact, some say oil is more precious than gold. With this in mind, it can be said that if you are trading oil, you will be in business for many years to come, and profits will await you!

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