Oil $$$$ Question

[ALPHAGRIZ1]

I have a few questions about buying into oil.

Lets say hypothetically you wanted to buy oil at say $30 a barrel. If you put down $10,000 what are you exactly buying? Are you buying stock?
Are you buying futures?
Are you buying oil that is still in the ground?
Or are you actually buying a barrel of oil? (Not that you would ever get a barrel)



Now lets say oil goes up to $100 a barrel, would you make $700k on your $10k?


How does this stuff work?

[ALPHAGRIZ1]

So nobody knows or even has a smart ass answer?

[TwinTownBisonFan]

you can buy any of the three

you can buy oil - the commodity... as in barrels of oil
you can buy oil futures (don't ask me to explain the futures market)
you can buy stock in a company that drills, or refines or sells oil

and when the price of oil goes up, the value of your position goes up... but you don't make a dime until you sell it.

In your example - you buy oil (the commodity) at $30/barrel and you sell it at $100/barrel you make a profit $70/barrel... $70x333 barrels of oil (which is what 10k could buy you at $30) is a profit of 23,310.

of course then there are any transaction fees and capitol gains taxes to consider - but that's another matter)

[93henfan]

So nobody knows or even has a smart ass answer?

I was just wondering what the hell you're going to do with a barrel of oil. Are you going to try to refine it? I say you'd be better off still getting your gas from Exxon.

[TwinTownBisonFan]

So nobody knows or even has a smart ass answer?

I was just wondering what the hell you're going to do with a barrel of oil. Are you going to try to refine it? I say you'd be better off still getting your gas from Exxon.

nah... alphies contemplating building a fuel hedge somewhere in montana...

(we actually have people in mn who do that... they co-op and buy gas in huge quantities cheap, and then draw down on it relative to their level of investment... in '08 during the last spike, they were paying $1.95/gallon while everyone else was at $3.50)

[ALPHAGRIZ1]

you can buy any of the three

you can buy oil - the commodity... as in barrels of oil
you can buy oil futures (don't ask me to explain the futures market)
you can buy stock in a company that drills, or refines or sells oil

and when the price of oil goes up, the value of your position goes up... but you don't make a dime until you sell it.

In your example - you buy oil (the commodity) at $30/barrel and you sell it at $100/barrel you make a profit $70/barrel... $70x333 barrels of oil (which is what 10k could buy you at $30) is a profit of 23,310.

of course then there are any transaction fees and capitol gains taxes to consider - but that's another matter)

OK, that makes more sense now.

One of my friends called and asked me the question I posted and I said I didnt have a clue about that since I have never bought or traded any of this stuff.

Thanks TTBF and no Im not starting a hedge.....I dont know what that is either.

[93henfan]

I was just wondering what the hell you're going to do with a barrel of oil. Are you going to try to refine it? I say you'd be better off still getting your gas from Exxon.

nah... alphies contemplating building a fuel hedge somewhere in montana...

(we actually have people in mn who do that... they co-op and buy gas in huge quantities cheap, and then draw down on it relative to their level of investment... in '08 during the last spike, they were paying $1.95/gallon while everyone else was at $3.50)

I was very close to partnering with two other guys a few years ago to build our own biodiesel operation, refining used cooking oil into pure biodiesel. Not the same, btw, as people who are burning the stuff directly.

[Wedgebuster]

Cleets, Inc is the resident expert on oil investing.

[TwinTownBisonFan]

you can buy any of the three

you can buy oil - the commodity... as in barrels of oil
you can buy oil futures (don't ask me to explain the futures market)
you can buy stock in a company that drills, or refines or sells oil

and when the price of oil goes up, the value of your position goes up... but you don't make a dime until you sell it.

In your example - you buy oil (the commodity) at $30/barrel and you sell it at $100/barrel you make a profit $70/barrel... $70x333 barrels of oil (which is what 10k could buy you at $30) is a profit of 23,310.

of course then there are any transaction fees and capitol gains taxes to consider - but that's another matter)

OK, that makes more sense now.

One of my friends called and asked me the question I posted and I said I didnt have a clue about that since I have never bought or traded any of this stuff.

Thanks TTBF and no Im not starting a hedge.....I dont know what that is either.

a hedge is when you anticipate the price of something will rise, so you buy a lot of it at the lower price so that you can draw on that cheaper reserve when prices get too high.

[bandl]

Cleets, Inc is the resident expert on oil investing.

Did you know...


That Cleets doesn't own a TV?


Not sure if you knew that. I don't think he's said that before on this board.

[93henfan]

Did you know...


That Cleets doesn't own a TV?

How do you learn anything without a TV? That's just crazy.

[bandl]

Did you know...


That Cleets doesn't own a TV?

How do you learn anything without a TV? That's just crazy.

He irons for alot of really high-up people, so he's in on all the gossip.

[93henfan]

How do you learn anything without a TV? That's just crazy.

He irons for alot of really high-up people, so he's in on all the gossip.

Makes sense.

[ALPHAGRIZ1]

Cleets, Inc is the resident expert on oil investing.

Did you know...


That Cleets doesn't own a TV?


Not sure if you knew that. I don't think he's said that before on this board.

Thats true, he told me it cuts into his iron fund and its just not worth it. Plus starch is getting more expensive as well and he believes in living within himself.................whatever that means...

[Chizzang]

I think I just had a D1B moment
I was enjoying the negative attention

[ALPHAGRIZ1]

You should never have to feel uncomfortable about being nicely pressed, this is 2011...............you can sue her!

[travelinman67]

The last time I followed Cleets' acdvice on hedges I wound up owning this...

[Ivytalk]

The last time I followed Cleets' acdvice on hedges I wound up owning this...

Looks like Easter Island with moss.

[travelinman67]

The last time I followed Cleets' acdvice on hedges I wound up owning this...

Looks like Easter Island with moss.

I was a little skeptical, but he said it's normal for them to have irregular performance.

[TwinTownBisonFan]

Looks like Easter Island with moss.

I was a little skeptical, but he said it's normal for them to have irregular performance.

I hear he tells his partners that all the time...