You won’t find many investments more volatile than crude oil. Oil price investing isn’t for the faint of heart — especially with sentiment being what it is — but you have multiple options when it comes to crude oil.
Most of us don’t have huge warehouses in which to store physical crude oil. It’s a cost-prohibitive investment strategy that few choose to make outside the corporate world. However, there are other ways to profit from crude oil prices and take massive profits from oil price investing.
Let’s look at some of my best oil price investing tips and how you can benefit from Energy Advantage.
Futures, ETFs, and Stocks for Oil Price Investing
The primary ways ordinary investors approach oil price investing are through futures contracts, exchange-traded funds (ETFs), and stocks in oil companies. All three investment vehicles can result in huge profits, but you have to time your plays just right.
Futures contracts, for instance, typically involve using leverage to invest in crude oil without taking possession of physical barrels. In other words, you’re essentially buying the right to purchase a certain number of barrels, such as 1,000, by some date in the future. If you sell when the price goes up, you profit.
Leverage can prove scary for low-risk investors. That’s because, if your oil price investing strategy doesn’t go the way you planned, you could lose lots of money — and owe more to your broker.
ETFs might seem more attractive to investors. They’re a way to engage in oil price investing through larger funds that roll over futures contracts month after month. Some of them lose money bit by bit, while others consistently profit. Doing your research becomes key if you want to protect your wealth.
Finally, you have oil price investing in the stock market. Oil companies sell shares in their companies to raise capital, and if you’re careful in your technical and fundamental analysis, you can predict how stock price movements will happen in the future. Buying, selling, and shorting oil stocks can be highly lucrative.
Watching IPOs for Oil Price Investing
One of the ways in which I predict oil price investing movements is by tracking IPOs. Crude oil is big business, and when a company issues an initial public offering — “goes public” — there’s often a huge opportunity to make money.
My Energy Advantage newsletter often helps subscribers take advantage of IPOs with strategic stock market investments. I look at the people in play, such as the company’s president or CEO, to determine how well-versed he is in crude oil and business in general, plus many other fundamentals.
IPOs also often result in tons of leaks. Some are real, and some are manufactured. In my experience, it doesn’t matter. A few leaked stories, no matter how outrageous, can send a stock through the roof. This often happens right after a company goes public and rumors run rampant.
Avoid Parking Your Cash
At one time, the best oil price investing strategy was to park your money in a so-called sure thing and leave it there for months or even years. You’d collect dividends until you eventually cashed out, perhaps just before retirement.
That strategy might still work, but it’s not the way to take advantage of crude oil prices, especially in such a volatile market.
Most of my Energy Advantage subscribers want to generate profits in a much shorter time frame, whether it’s weeks or a few months. I help them by identifying oil price investing opportunities that they can exit in a short time frame.
Think about it. Wouldn’t you rather enter a position on August 15 and exit on September 15 with triple-digit profits than wait 10 years to see any real returns on your investment? That’s what I thought.
Learning How to Profit in Multiple Ways Through Energy Advantage
When it comes to oil price investing, I want to protect my wealth while profiting in as many ways as possible. Buying to cover is one strategy, but there are others.
I’ve been doing this long enough that I can spot specific events and patterns that are bound to recur given the same circumstances. It’s a combination of fundamental and technical analysis. A catalyst — such as a merger or acquisition — combined with a specific chart pattern can lead to triple-digit returns. In other words, turning $100,000 into $300,000.
Do opportunities like that occur every day? Of course not. They’re few and far between, which is why I stay on top of the stock market and commodities so I can take advantage of oil price investing opportunities. Plus, I share my predictions with my subscribers.
The great thing about many of the plays I share is that there are multiple ways to profit from the same event. By selling, shorting, and trading options, you can maximize each catalyst and take home profits quickly.
Transitioning From Investing to Trading
I’m using the phrase “oil price investing” here because it’s common parlance for what I do, but what I’m actually talking about is oil price trading. There’s a big difference.
An investment often seems to take forever to pay off.
Let’s say you buy a house that you want to rent to tenants for a profit. You spend, say, $200,000 on the house, and let’s say you’re in the position to pay cash. At least you won’t see an interest charge on the purchase.
Your tenant rents the house for $2,000 per month. In theory, you’d start to get a return on your investment in about eight years. But you have to pay taxes on the property, fix anything that goes wrong, and maintain insurance on the physical structure.
Sure, you get tax breaks and other incentives, but this is a true investment. You’re not expecting to profit next week. It’ll take a decade.
And that’s fine for some people — but not for me.
Trading is a different way to approach oil price investing. Instead of betting on the big oil companies, you find opportunities to turn a profit in days, weeks, or, at most, months. My strategy revolves around price movement. I want to see some volatility before I make a play because the only surefire way to not make money is for no price fluctuation to occur.
If you’re covering both sides, you can make money when crude oil prices go down and when they go up.
Ideally, I want oil price investing to involve securities that are destined to break resistance or fall below support. A bull or bear flag, for instance, is a great play for short-term trading because you often get multiple opportunities to enter and exit the same position, all while taking profits.
Taking Advantage of Speculation
From Wall Street to CNN analysts, speculation can cause wide swings in crude oil prices. This makes oil price investing consistently exciting.
Speculators — especially those engaged in consistently executing futures contracts for major investment firms — are worth watching. They’re in a position to influence stock market prices as well as other securities, like commodities and ETFs.
When someone has the power to influence oil price investing, pay attention. This is when you can generate huge, short-term profits, but you have to time your plays down to the minute.
Understanding That You Can Lose Money
When you’re just getting started with oil price investing, you might feel tempted to act the minute you hear a “hot tip,” assuming it can’t go south. It can.
I’ve been running Energy Advantage and other publications for a long time, and I’ve helped people generate tons of profits, but I’m wrong sometimes, too. It happens. That’s why you have to learn how to mitigate your own risk.
Trading with only a portion of your account helps. Let’s say you deposit $12,000 in your trading account. If you only risk 10 percent of it on a single play, you don’t have to worry about huge losses. That’s important.
I know many traders who never risk more than 1 percent of their trading accounts on single oil price investments. They might have huge accounts — in the triple digits or more — but they’re still conservative. That approach can serve you well.
Oil price investing is what I live for. It makes every day exciting, and I love sharing what I know with new and everyday investors who want to make consistent, short-term profits.
That’s why I started Energy Advantage in the first place. When more people know my strategies, they can use them to realize their dreams, replace their incomes, or otherwise save for important expenses.
It takes discipline and courage, and sometimes you lose. That’s why it’s called “investing” and not a “sure thing.” However, I have enough experience to win far more than I lose.