# I am going to trade oil after the bottom **URL:** \ **Category:** Miscellaneous and Personal Stuff I Must Share\ **Created:** [December 9, 2015, 5:15am UTC](https://boards.straightdope.com/t/i-am-going-to-trade-oil-after-the-bottom/739909 "2015-12-09T05:15:33Z")\ **Posts on this page:** 20\ **Page:** 5
**Author:** ![Slash1972](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/slash1972/32/6461_2.png) [@Slash1972](https://boards.straightdope.com/u/Slash1972)\ **Post date:** [January 11, 2016, 11:24pm UTC](https://boards.straightdope.com/t/i-am-going-to-trade-oil-after-the-bottom/739909/82 "2016-01-11T23:24:21Z")
> [@Trom](#): > > You won’t be allowed to hold the contract to expiration and take delivery. As the contract expiration date approaches there are a number of notices sent out to clearing firms and brokers warning them to close out contracts. Your broker will be required by their clearing firm to close out or supply instructions on delivery to the exchange. If no arrangement is made either the broker or clearing firm will close the contract at their discretion - and probably at a horrible price for you. That makes sense. Could I make arrangements to have them delivered to my neighbors house? Sort of like the old “pizza delivery” joke? ---
**Author:** ![Charlie\_Wayne](https://avatars.discourse-cdn.com/v4/letter/c/4bbf92/32.png) [@Charlie\_Wayne](https://boards.straightdope.com/u/Charlie_Wayne)\ **Post date:** [January 12, 2016, 1:42am UTC](https://boards.straightdope.com/t/i-am-going-to-trade-oil-after-the-bottom/739909/83 "2016-01-12T01:42:33Z")
> [@septimus](#): > > In the context of [say, this chart](http://www.nasdaq.com/markets/crude-oil.aspx?timeframe=3y), what would a double-bottom look like? Your double-bottom buy signal would be when oil rises to what price? > > What’s causing the glut? Deliberate Saudi cartel-busting? Is there some political development which could reverse that? This link fully explains “double bottom”. > **[Double Top and Bottom Patterns Defined, Plus How to Use Them](https://www.investopedia.com/terms/d/double-top-and-bottom.asp?header_alt=b)** > > Double tops and bottom are technical chart patterns that indicate reversals based on an "M" or "W" shape. ---
**Author:** ![Trom](https://avatars.discourse-cdn.com/v4/letter/t/958977/32.png) [@Trom](https://boards.straightdope.com/u/Trom)\ **Post date:** [January 12, 2016, 4:37pm UTC](https://boards.straightdope.com/t/i-am-going-to-trade-oil-after-the-bottom/739909/84 "2016-01-12T16:37:01Z")
> [@Slash1972](#): > > That makes sense. Could I make arrangements to have them delivered to my neighbors house? Sort of like the old “pizza delivery” joke? Each futures contract specifies a quantity, grade, price, time, and location for delivery. See the CME WTI Crude Oil futures specifications [here.](http://www.cmegroup.com/trading/energy/crude-oil/light-sweet-crude_contract_specifications.html) > [@](#): > > Delivery shall be made free-on-board (“F.O.B.”) at any pipeline or storage facility in Cushing, Oklahoma with pipeline access to Enterprise, Cushing storage or Enbridge, Cushing storage. Delivery shall be made in accordance with all applicable Federal executive orders and all applicable Federal, State and local laws and regulations. > > At buyer’s option, delivery shall be made by any of the following methods: (1) by interfacility transfer (“pumpover”) into a designated pipeline or storage facility with access to seller’s incoming pipeline or storage facility; (2) by in-line (or in-system) transfer, or book-out of title to the buyer; or (3) if the seller agrees to such transfer and if the facility used by the seller allows for such transfer, without physical movement of product, by in-tank transfer of title to the buyer. For [Lumber](http://www.cmegroup.com/rulebook/CME/II/200/201/201.pdf) (pdf): > [@](#): > > Each delivery unit shall consist of nominal 2x4’s of random lengths from 8 feet to 20 feet. Each delivery unit shall consist of and be grade stamped #1 or #2 AND BETTER. Each delivery unit shall be manufactured in California, Idaho, Montana, Nevada, Oregon, Washington, Wyoming, or Alberta or British Columbia, Canada, and contain lumber produced from and grade stamped Hem Fir (except that Hem-Fir shall not be deliverable if it is manufactured in Canada; nor that portion of Washington including and to the west of Whatcom, Skagit, Snohomish, King, Pierce, Lewis and Skamania counties; nor that portion of Oregon including and to the west of Multnomah, Clackamas, Marion, Linn, Lane, Douglas and Jackson counties; nor that portion of California west of Interstate Highway 5 nor south of US Highway 50), Englemann Spruce, Lodgepole Pine, Englemann Spruce/Lodgepole Pine and/or Spruce Pine Fir (except that Spruce-Pine-Fir shall not be deliverable if it is manufactured in those portions of Washington, Oregon and California that are noted above). > > … > > Delivery shall be made on track at the producing mill. The delivery unit must be loaded at the on-site siding of the producing mill or, if a mill normally uses an off-site location for rail loading because rail access does not exist, then a delivery unit may be loaded on track at that designated off-site location by the producing mill. The unit must be shipped on an original bill of lading and the mill number must be noted on the bill of lading. A single delivery unit must be delivered from the same mill. Mills are limited to one location for purposes of delivery and, if off-site, must receive approval of the site from the Exchange prior to making delivery from that location. > The lumber shall be wrapped in paper, poly or their industry recognized equivalents and loaded on a flat car. All lumber delivered shall include only pieces produced directly from logs or mill run rough lumber, with no pre-sorting for grade prior to planing. Remanufactured pieces made from previously planed lumber are not acceptable for delivery. Once you satisfy those requirements you can do whatever you want with your product. ---
**Author:** ![Try2B\_Comprehensive](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/try2b_comprehensive/32/65_2.png) [@Try2B\_Comprehensive](https://boards.straightdope.com/u/Try2B_Comprehensive)\ **Post date:** [January 13, 2016, 6:58am UTC](https://boards.straightdope.com/t/i-am-going-to-trade-oil-after-the-bottom/739909/85 "2016-01-13T06:58:14Z")
There appear to be no double bottoms in **Septimus** ’ chart, oil never breaks above its resistance. ---
**Author:** ![Charlie\_Wayne](https://avatars.discourse-cdn.com/v4/letter/c/4bbf92/32.png) [@Charlie\_Wayne](https://boards.straightdope.com/u/Charlie_Wayne)\ **Post date:** [January 13, 2016, 7:49am UTC](https://boards.straightdope.com/t/i-am-going-to-trade-oil-after-the-bottom/739909/86 "2016-01-13T07:49:51Z")
> [@Try2B\_Comprehensive](#): > > There appear to be no double bottoms in **Septimus** ’ chart, oil never breaks above its resistance. Not yet. You have to wait for one. ---
**Author:** ![botsgotme](https://avatars.discourse-cdn.com/v4/letter/b/91b2a8/32.png) [@botsgotme](https://boards.straightdope.com/u/botsgotme)\ **Post date:** [January 13, 2016, 12:36pm UTC](https://boards.straightdope.com/t/i-am-going-to-trade-oil-after-the-bottom/739909/87 "2016-01-13T12:36:45Z")
I think the Saudis are waiting for a substantial shut down of other suppliers…like the USA (half the shale oil drillers will be bankrupt by mid-2016). then they will cut production, and the price will soar. We could see $60/barrel when this happens. ---
**Author:** ![Charlie\_Wayne](https://avatars.discourse-cdn.com/v4/letter/c/4bbf92/32.png) [@Charlie\_Wayne](https://boards.straightdope.com/u/Charlie_Wayne)\ **Post date:** [January 13, 2016, 1:37pm UTC](https://boards.straightdope.com/t/i-am-going-to-trade-oil-after-the-bottom/739909/88 "2016-01-13T13:37:50Z")
> [@botsgotme](#): > > I think the Saudis are waiting for a substantial shut down of other suppliers…like the USA (half the shale oil drillers will be bankrupt by mid-2016). then they will cut production, and the price will soar. We could see $60/barrel when this happens. Sounds very likely to me. Of course, my opinion is this matter is no better or worse than anyone else’s opinion. I am not any kind of expert on oil and I am not qualified to make predictions about the price of oil at all. Not at all. But what do I base my opinion on? First off, I think the very best guage as to future prices is simply supply and demand. If someone was to research the worldwide figures on supply and demant, I think they would be well ahead of the majority of the population. But another factor that I consider to be almost as strong is “human greed”. This is the basis of my upcoming opinion and this is why I would warn you that it’s not really worth anything more than your opinion. But, when oil was $60 a barrel, some people (specifically, I would point to the Saudis) were raking in a fortune. Now that the price is headed down to $10 (according to some analysts), they very likely do not see that as meaning they are only making billions instead of trillions. IMHO, they likely see it as they are \*\*LOSING \*\*trillions instead of making trillions. Sound familiar? It’s from the movie “Casino”. If I was one of those Saudis, I would be on the verge of losing my mind, waiting until I could do something to get the price back up to $60. My motive? Pure greed! One of the strongest human motives I have ever experienced. So, take it or leave it as you will. But I must say that I strongly agree with botsgotme. I expect the Saudis will do whatever it takes whenever the time is right for them to make some big move. ---
**Author:** ![Charlie\_Wayne](https://avatars.discourse-cdn.com/v4/letter/c/4bbf92/32.png) [@Charlie\_Wayne](https://boards.straightdope.com/u/Charlie_Wayne)\ **Post date:** [January 13, 2016, 1:45pm UTC](https://boards.straightdope.com/t/i-am-going-to-trade-oil-after-the-bottom/739909/89 "2016-01-13T13:45:36Z")
> [@septimus](#): > > In the context of [say, this chart](http://www.nasdaq.com/markets/crude-oil.aspx?timeframe=3y), what would a double-bottom look like?\ A double bottom looks like the letter upper-case W. But it’s not that simple. Quoting from my link above: > **[Double Top and Bottom Patterns Defined, Plus How to Use Them](https://www.investopedia.com/terms/d/double-top-and-bottom.asp?header_alt=b)** > > Double tops and bottom are technical chart patterns that indicate reversals based on an "M" or "W" shape. "Remember that the security needs to break through the support line to signal a reversal in the downward trend and should be done on higher volume. As in the double top, do not be surprised if the price returns to the breakout point to test the new support level in the upward trend. To get a good understanding of double tops and double bottoms, you really need to read the entire article. It’s not that long and it could be worth a great deal to you. The part about “higher volume” is extremely important. It would be a big mistake to buy when the chart looks like the letter “W” if you do not have the volume numbers and you can confirm they follow what is said in that article. They need to break through the support line to signal a reversal in the downward trend and should be done on higher volume. As in the double top, do not be surprised if the price returns to the breakout point to test the new support level in the upward trend." ---
**Author:** ![Charlie\_Wayne](https://avatars.discourse-cdn.com/v4/letter/c/4bbf92/32.png) [@Charlie\_Wayne](https://boards.straightdope.com/u/Charlie_Wayne)\ **Post date:** [January 13, 2016, 1:53pm UTC](https://boards.straightdope.com/t/i-am-going-to-trade-oil-after-the-bottom/739909/90 "2016-01-13T13:53:04Z")
The reason I think that buying on a “double bottom” is such a good idea is because so many of the professional traders will do that as well. Even if the fundamentals (supply and demand figures) are not enough to cause the price to rise, the fact that so many of the professional traders will be buying is enough to cause serious upward pressure on the price. But once again, these are just my opinions and it would be very foolish for you to put your money at risk based on the opinions of some amateur trader who is essentially a stranger to you. Do you own research and do your own thinking. Please. ---
**Author:** ![Charlie\_Wayne](https://avatars.discourse-cdn.com/v4/letter/c/4bbf92/32.png) [@Charlie\_Wayne](https://boards.straightdope.com/u/Charlie_Wayne)\ **Post date:** [January 13, 2016, 4:31pm UTC](https://boards.straightdope.com/t/i-am-going-to-trade-oil-after-the-bottom/739909/91 "2016-01-13T16:31:57Z")
I thought it would be best for me to explain that when I said, “amateur trader who is essentially a stranger to you”, I was referring to myself. ---
**Author:** ![Try2B\_Comprehensive](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/try2b_comprehensive/32/65_2.png) [@Try2B\_Comprehensive](https://boards.straightdope.com/u/Try2B_Comprehensive)\ **Post date:** [January 14, 2016, 3:06pm UTC](https://boards.straightdope.com/t/i-am-going-to-trade-oil-after-the-bottom/739909/92 "2016-01-14T15:06:10Z")
Ha ha, that’s how I took it. I don’t recommend anyone blindly following my advice either. ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [January 14, 2016, 3:34pm UTC](https://boards.straightdope.com/t/i-am-going-to-trade-oil-after-the-bottom/739909/93 "2016-01-14T15:34:20Z")
> [@Try2B\_Comprehensive](#): > > Ha ha, that’s how I took it. I don’t recommend anyone blindly following my advice either. In the unlikely event that I offer trading advice, I strongly recommend that people pay close attention … _ **… and do the opposite of me!** _ ---
**Author:** ![Try2B\_Comprehensive](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/try2b_comprehensive/32/65_2.png) [@Try2B\_Comprehensive](https://boards.straightdope.com/u/Try2B_Comprehensive)\ **Post date:** [January 17, 2016, 7:56pm UTC](https://boards.straightdope.com/t/i-am-going-to-trade-oil-after-the-bottom/739909/94 "2016-01-17T19:56:14Z")
While I am not a financial professional, I am in personal contact with some of those. I had the chance to talk with a market research analyst acquaintance of mine this week about oil and the markets in general, and I thought I would share what he said here. His main point was that he does not expect to see a V-shaped rebound in oil prices, but rather longer-term lows. He pointed to the oil slump in the 80s when oil stayed depressed for years, and suggested that is how the oil industry works, we ought to expect something similar in this slump. He also stressed that he doesn’t expect US production to drop as fast as some people are predicting (for example, Goldman Sachs is saying the bottom will hit in 6 months). His reason is that the anticipated wave of bankruptcies among oil drillers that is supposed to cut production will play out more slowly than some people predict. The reason is that lenders are loath to forclose on drillers. As they start to stumble, he predicts they will re-negotiate their lines of credit to buy them more time to stabilize, say an extra 6 months. The ones that are still on the skids and facing bankruptcy can avail themselves of “another 6 months or so of legal wrangling” before a bankruptcy is finalized. They will keep pumping that whole time, even at low prices, since that is their source of revenues. His take is that it will take 12-18 months for supply to drop below demand. He also pointed out that rising interest rates are going to create general headwinds to economies everywhere, which could put downward pressure on demand overall. He thinks in the long run it is the ‘big integrateds’ who will be the winners- Exxon, Chevron, BP, those kinds of guys. They are financially secure enough to ride out the lows, and will be in a position to secure financing to buy up the properties of the smaller players for pennies on the dollar, for large profits later. Now, Exxon and BP are part of the reason I have never invested in oil, so my picks remain Schlumberger, Chevron and ConocoPhillips. I want to look into Total, and it appears I have a fair bit of time to change my mind before opening a position. I alsosaw a good [article](http://seekingalpha.com/article/3814646-how-low-can-oil-go) about all this. The author is more of a long-term value investor where I am looking for a quick trade, but I may want to reconsider a longer term dividend play if these stocks trend low enough. ---
**Author:** ![Napier](https://avatars.discourse-cdn.com/v4/letter/n/ce73a5/32.png) [@Napier](https://boards.straightdope.com/u/Napier)\ **Post date:** [January 17, 2016, 9:10pm UTC](https://boards.straightdope.com/t/i-am-going-to-trade-oil-after-the-bottom/739909/95 "2016-01-17T21:10:59Z")
Goodness, 2B, be careful and don’t play with more money than you can afford to lose. It’s your money, which gives you the power to lose it all, but that’d probably be a shame if you have any other needs and obligations to take care of, like most of us do. If you’re feeling things out here on the Dope, take home the message that most things are lined up against you. If there’s a fretful little voice inside, listen. This isn’t meant to be snarky at all; I think you have the sound of somebody who’s about to put a lot of effort into losing. The quickest way to a small fortune in commodities is to start with a big fortune. ---
**Author:** ![Charlie\_Wayne](https://avatars.discourse-cdn.com/v4/letter/c/4bbf92/32.png) [@Charlie\_Wayne](https://boards.straightdope.com/u/Charlie_Wayne)\ **Post date:** [January 17, 2016, 10:31pm UTC](https://boards.straightdope.com/t/i-am-going-to-trade-oil-after-the-bottom/739909/96 "2016-01-17T22:31:45Z")
> [@Napier](#): > > The quickest way to a small fortune in commodities is to start with a big fortune. I never heard that before. Very profound. I think you must have a great deal of experience with people who have tried to make money in the markets. After dabbling for many years, my conclusion is this it not an endeavor for amateurs. It is strictly for professionals who make much of their money by fleecing amateurs. By “fleecing”, I don’t mean they are necessarily doing anything wrong. But they take advantage of advice they get from other pros in their firm and the cumulative wisdom of all those people make it almost a certainty they will win and the amateurs will lose - at least for the most part. I’d be interested to hear what you think about that. ---
**Author:** ![Bill\_Door](https://avatars.discourse-cdn.com/v4/letter/b/50afbb/32.png) [@Bill\_Door](https://boards.straightdope.com/u/Bill_Door)\ **Post date:** [January 17, 2016, 11:48pm UTC](https://boards.straightdope.com/t/i-am-going-to-trade-oil-after-the-bottom/739909/97 "2016-01-17T23:48:34Z")
From _Trading Places_: [QUOTE=Randolph Duke] The good part, William, is that, no matter whether our clients make money or lose money, Duke & Duke get the commissions. [/QUOTE] ---
**Author:** ![botsgotme](https://avatars.discourse-cdn.com/v4/letter/b/91b2a8/32.png) [@botsgotme](https://boards.straightdope.com/u/botsgotme)\ **Post date:** [January 18, 2016, 12:27am UTC](https://boards.straightdope.com/t/i-am-going-to-trade-oil-after-the-bottom/739909/98 "2016-01-18T00:27:49Z")
> [@Try2B\_Comprehensive](#): > > While I am not a financial professional, I am in personal contact with some of those. I had the chance to talk with a market research analyst acquaintance of mine this week about oil and the markets in general, and I thought I would share what he said here. > > His main point was that he does not expect to see a V-shaped rebound in oil prices, but rather longer-term lows. He pointed to the oil slump in the 80s when oil stayed depressed for years, and suggested that is how the oil industry works, we ought to expect something similar in this slump. > > He also stressed that he doesn’t expect US production to drop as fast as some people are predicting (for example, Goldman Sachs is saying the bottom will hit in 6 months). His reason is that the anticipated wave of bankruptcies among oil drillers that is supposed to cut production will play out more slowly than some people predict. The reason is that lenders are loath to forclose on drillers. As they start to stumble, he predicts they will re-negotiate their lines of credit to buy them more time to stabilize, say an extra 6 months. The ones that are still on the skids and facing bankruptcy can avail themselves of “another 6 months or so of legal wrangling” before a bankruptcy is finalized. They will keep pumping that whole time, even at low prices, since that is their source of revenues. > > His take is that it will take 12-18 months for supply to drop below demand. He also pointed out that rising interest rates are going to create general headwinds to economies everywhere, which could put downward pressure on demand overall. He thinks in the long run it is the ‘big integrateds’ who will be the winners- Exxon, Chevron, BP, those kinds of guys. They are financially secure enough to ride out the lows, and will be in a position to secure financing to buy up the properties of the smaller players for pennies on the dollar, for large profits later. > > Now, Exxon and BP are part of the reason I have never invested in oil, so my picks remain Schlumberger, Chevron and ConocoPhillips. I want to look into Total, and it appears I have a fair bit of time to change my mind before opening a position. > > I alsosaw a good [article](http://seekingalpha.com/article/3814646-how-low-can-oil-go) about all this. The author is more of a long-term value investor where I am looking for a quick trade, but I may want to reconsider a longer term dividend play if these stocks trend low enough. good points…I would add that once wells are capped/shut down, they deteriorate. So a marginal produce like Venezuela will find it hard to restart production, after a prolonged shutdown. This is what the Saudis are banking on, once demand recovers-drive their competion out of the market. ---
**Author:** ![Try2B\_Comprehensive](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/try2b_comprehensive/32/65_2.png) [@Try2B\_Comprehensive](https://boards.straightdope.com/u/Try2B_Comprehensive)\ **Post date:** [January 18, 2016, 3:57am UTC](https://boards.straightdope.com/t/i-am-going-to-trade-oil-after-the-bottom/739909/99 "2016-01-18T03:57:01Z")
> [@Napier](#): > > Goodness, 2B, be careful and don’t play with more money than you can afford to lose. It’s your money, which gives you the power to lose it all, but that’d probably be a shame if you have any other needs and obligations to take care of, like most of us do. If you’re feeling things out here on the Dope, take home the message that most things are lined up against you. If there’s a fretful little voice inside, listen. This isn’t meant to be snarky at all; I think you have the sound of somebody who’s about to put a lot of effort into losing. > > The quickest way to a small fortune in commodities is to start with a big fortune. The fretful little voice is telling me, “pay off your credit card before you buy any more stocks.” It is tempting to buy now while I have the cash and everything is down, but actually I have pretty good discipline when it comes to this kind of decision. I will very likely do the right thing this time and pay off the credit card. I appreciate your advice. I won’t go ‘all in’ with this, at maximum I will commit 5% of my portfolio to it. It would actually push my portfolio towards a more balanced diversification, even if oil is kind of icky and gross. Part of the payoff is that I am simply interested in stocks and investing in general. I enjoy building models of how it all works, betting a little money on it, and winning. If I lose, at least I know there is a problem somewhere with the model and will probably learn something useful pinning that down. It’s educational. I hope this thread is interesting and educational to anyone who stumbles across it, whether they are going to buy any stocks or not. ---
**Author:** ![Try2B\_Comprehensive](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/try2b_comprehensive/32/65_2.png) [@Try2B\_Comprehensive](https://boards.straightdope.com/u/Try2B_Comprehensive)\ **Post date:** [January 18, 2016, 3:59am UTC](https://boards.straightdope.com/t/i-am-going-to-trade-oil-after-the-bottom/739909/100 "2016-01-18T03:59:31Z")
> [@botsgotme](#): > > I would add that once wells are capped/shut down, they deteriorate. So a marginal produce like Venezuela will find it hard to restart production, after a prolonged shutdown. I didn’t know that about Venezuela. People talk about a relatively easy re-start to horizontal fracking when prices pick back up. Is that really true? What kind of wells are least/most adaptable to being capped and restarted? ---
**Author:** ![Shagnasty](https://avatars.discourse-cdn.com/v4/letter/s/9dc877/32.png) [@Shagnasty](https://boards.straightdope.com/u/Shagnasty)\ **Post date:** [January 18, 2016, 5:15am UTC](https://boards.straightdope.com/t/i-am-going-to-trade-oil-after-the-bottom/739909/101 "2016-01-18T05:15:08Z")
> [@Try2B\_Comprehensive](#): > > The fretful little voice is telling me, “pay off your credit card before you buy any more stocks.” It is tempting to buy now while I have the cash and everything is down, but actually I have pretty good discipline when it comes to this kind of decision. I will very likely do the right thing this time and pay off the credit card. Pay off ALL of your credit card debt before you invest another cent in the market and then don’t create any more revolving credit card debt ever again. That is a guaranteed return on investment that cannot be matched by any other strategy. Even an extremely good credit card rate of 10% (more likely about 18%) completely offsets any investments you make on the investment side with gains less than that and usually much more. [Previous page](https://boards.straightdope.com/t/i-am-going-to-trade-oil-after-the-bottom/739909.md?page=4) [Next page](https://boards.straightdope.com/t/i-am-going-to-trade-oil-after-the-bottom/739909.md?page=6)