I screwed up, bought CL but now steep contango, what happens before expiry?

[saa 0]

FlagshipShow,

Are you referring to USO and DBO or only USO at this time? Thanks.

[Tomaz Korosec + 3]

What I did is closed all CL futures and options and just went 100 % all in DBO.. It behaves much better than USO or front month CL. Had I switched on thursday I would not loose 5.000 USD... 

 

But Flagshipshow I still do not understand one thing, so you think front month will fill the gap? It went from 4 to 5,6 and now 7 point difference.  I fear this will just stay the same until expiration which means on last trading day one will have to close front month and buy back month for 7$ more.. Either this or maybe back month will come closer to front one

Like I said this is first time direct oil trading for me and specially in those circumstances so I will wath it closely in the coming days to see what will happen with this spread. If it will stay so wide or if front month will begin drifting upward towards the second month or vice versa. I would say front month will stay low, because everyone knows there is waaaay to much oil now and this is keeping front month low. Second month is higher because it trades more than 1 month out, but that one will also drift lower with time I would think.. Demand / supply will not be balanced for a few more months at least and that is what will probably keep pushing price down month after month and make big losses on those keeping only front month active each time.  Thats also the reason I sold everything on pop and bought DBO etf which has many contracts open at the same time and tries to optimize roll so it looses less on contango. It also says it pays 2 % dividend, not sure how it manages to do that. Probably becuase part of it holds treasuries.

One question is also, how to best play this upcoming oil rebound.  I am having a hard time deciding if I will only be 100 % invested in DBO or if I should maybe buy some individual names such as XOM, RBS.A, CVK, COP or even ETF like XLE, maybe some XOP etc.. If you look through history stock and stock ETFs lost a lot less during last 20 years and pay nice dividend. On the other hand some already rebounded 50 % from the bottom.. So I clearly missed this boat.. There is still upside, but surely it would be much better play to close my CL longs and switch to stocks when it was at 20, insted of trying to get money out of CL and experiencing huge contango headwind while OIL stocks recovered nicely

 

 

 

 

[FlagshipShow + 3]

Dude.  Lucky you.  
I expected the contango spread to lessen.  As soon as it continued to widen I flipped over to to short front and long JUN. I closed at 9am before it went nuts. That would have blown up both of our accounts...  IBKR got hit w $88M

[FlagshipShow + 3]

I would have made $25k x 4 if I'd have stayed in... Probably will never happen again.

 

[FlagshipShow + 3]

Good choice not going w USO.  God was whispering in your ear

[Tomaz Korosec + 3]

I mean this was crazy yes.. I am now without any positions, bought back my short DBO puts yesterday on recovery, but now I am still sitting on 35% loss for this year    Now I am thinking about strategy on how to recover this loss when oil recovers. If it is better to go with XLE/IXC ETF or similar or stick to DBO which is pure crude play..  On one hand XLE is waaaay above the low it made when CL made low, on the other hand I think it ran up to far already and DBO will be the next to recover when oil demand finaly picks up. DBO now own february 2021 CL futures which will not be under pressure so much even if front month still tanks for next few months..  I could have recovered my losses way back if I would not stick to CL but rather watch XLE.. But I was so fixated on pure oil play that I did not check anything else and when I finally did I was shocked to see that stocks / etfs were now already 50% higher above the low made while CL just makes new lows.. So yeah, live and learn I guess, but it will be hard to cover this 35 % loss. I need 50 % gain to go back to where I was a few months ago

[Juan Pablo Alvarez Gallesio 0]

Only front month positions expire and must be roll over, unless you want to execute the physical contract. 

If you want to bet on oil for the future, I recommend you to buy anything but the front month contract. 

Just take into account, that the further you go the less liquidity you will have. Same happens before a contract comes to an end. My recommendation if you are trading a front month contract which is about to expire is to close your position at least 1 week before the expiration. This will give you enough liquidity to fill your order and avoid you getting burned like this week WTI contract. 

Also, if you are not a fully dedicate trader, read it as being in front of the screens while the market is open with your reuters or Bloomberg open with real time charts and the NYMEX I strongly suggest you to do anything else but trade commodities futures because trust me, you can get burned in 5 minutes. 

Hope my advise helped you.

All the best

[Schizoidsteve 0]

I'm the new guy.