Favorite stocks for 2009: Top picks from 75 advisors
asr: this is another way of LONG stock market play, following news letter pick recomendations
---------
interesting 'Proshares Ultra Oil index' DIG was chosen , DIG is LONG, DUG is SHORT 'pro ultra short OIL '
Top Stock Picks '09: ProShares Ultra Oil & Gas (DIG)
"ProShares Ultra Oil and Gas (NYSE: DIG), my top idea for 2009, is an exchange-traded fund that positions itself with the performance of the United States' top oil and gas companies," says growth stock specialist Paul Tracy.
In his StreetAuthority Market Advisor, he explains, "The 'ultra' part of its name means that the fund uses leverage, which magnifies returns by a factor of two relative to the Dow Jones U.S. Oil & Gas Index."
--------------
asr: since all these 75 picks are from 75 different advisors each advisor giving his TOP pick ( just one) , if you back test based on 1/1/2009 BUY entry combined as whole this 75 avarge return till date should be much better than INDEX .
Looking for a shopping list of new stock ideas for 2009? Each year for 26 years, TheStockAdvisors.com has turned to the nation's most respected and well-known newsletter advisors and asked them for their favorite stock or fund ideas for the coming 12 months.
With 75 advisors participating in this year's survey, there's something for every type of investor, from high quality blue chips to speculative home runs. As always, we caution you to only use these ideas as a starting place for your own research and only buy stocks that meet you personal investing criteria, risk parameters, and time horizon.
Friday, August 28, 2009
Support Resistance S / R
Alchemy JOe explains how S /R are calculated
https://www.tradestation.com/Discussions/Topic.aspx?Topic_ID=8863
Dear Future Trader,
Thanks for your inquiry. The resistance levels R1, R2 and R3 as well as the support levels S1, S2 and S3 are calculated based on a standard Floor Traders Pivots calculation that uses the
1) previous sessions high/low/close AVERAGE => (H+L+C )/3 ( notice no OPEN )
2) the previous sessions high and the
3) previous sessions low.
For daily pivots, the previous session is based on the previous days' high, low and close whereas for weekly pivots, the previous session is based on the previous weeks' high, low and close.
Please let me know if I can help you with any other questions.
------------
asr note: HIghTower Report , QuantLogic , Alchemy all of them may be using the same S /R formula as below .
- Even if they use some small variation , it does not matter becuase there may be only samll 10 to 20 cent difference for crude OIL price S1/S2 R1/R2 which does not matter much . All what matters is do you want to take trade postion at this S/R levels based on fundamental news of that day .
- Alchemy rolling pivot points ( hourly ) must also be based on this same formula except they were taken previous HOUR H/L/C
http://www.tradingalchemy.com/ViewChartsRollingFTPivots.htm
- It seems time window is param, we can change with input 60 min or 30 min etc.
https://www.tradestation.com/Discussions/Topic.aspx?Topic_ID=8854
-----------
The calculation for the new day are calculated from the High (H), low (L) and close (C) of the previous day.
Pivot point = P = (H + L + C)/3
First area of resistance = R1 = 2P - L
First area of support = S1 = 2P - H
Second area of resistance = R2 = (P -S1) + R1
Second area of support = S2 = P - (R2 - S1)
As prices continually rotate to enhance trading, prices of perceived value (support) and perceived over valuation (resistance) can be recognized by the volume of activity at different price levels. This is the basis of Market ProfileTM (MP) analysis. Distinct patterns of volume and price behaviour can be recognized using MP profiles.
MP illustrates that the majority of trading in a day is by floor traders or "locals" as they are called. These locals constantly take prices up and down to very short term levels of support and resistance, exploring the narrow limits of price/valuation tolerance. Trading for the day will persist between this narrow range unless "outside" buyers and sellers are attracted to the price changes that occur. If the narrow range of support or resistance established by the floor traders can be wrestled from them, then off floor short term traders will be attracted and enter the market, as buyers if short term resistance is overcome or as sellers if short term support is violated. These breakout points then usually reverse their function and serve as test points, i.e. previous resistance becomes support and previous support becomes resistance.
Now the active range of trading expands as the off floor traders enter the fray. If more longer established support and resistance can be successfully breached during the new short term trend that emerges, with the activity of the off floor traders, then longer term traders, position traders, with an intermediate or long term intention of their market commitment will be attracted to join the market.
https://www.tradestation.com/Discussions/Topic.aspx?Topic_ID=8863
Dear Future Trader,
Thanks for your inquiry. The resistance levels R1, R2 and R3 as well as the support levels S1, S2 and S3 are calculated based on a standard Floor Traders Pivots calculation that uses the
1) previous sessions high/low/close AVERAGE => (H+L+C )/3 ( notice no OPEN )
2) the previous sessions high and the
3) previous sessions low.
For daily pivots, the previous session is based on the previous days' high, low and close whereas for weekly pivots, the previous session is based on the previous weeks' high, low and close.
Please let me know if I can help you with any other questions.
------------
asr note: HIghTower Report , QuantLogic , Alchemy all of them may be using the same S /R formula as below .
- Even if they use some small variation , it does not matter becuase there may be only samll 10 to 20 cent difference for crude OIL price S1/S2 R1/R2 which does not matter much . All what matters is do you want to take trade postion at this S/R levels based on fundamental news of that day .
- Alchemy rolling pivot points ( hourly ) must also be based on this same formula except they were taken previous HOUR H/L/C
http://www.tradingalchemy.com/ViewChartsRollingFTPivots.htm
- It seems time window is param, we can change with input 60 min or 30 min etc.
https://www.tradestation.com/Discussions/Topic.aspx?Topic_ID=8854
-----------
The calculation for the new day are calculated from the High (H), low (L) and close (C) of the previous day.
Pivot point = P = (H + L + C)/3
First area of resistance = R1 = 2P - L
First area of support = S1 = 2P - H
Second area of resistance = R2 = (P -S1) + R1
Second area of support = S2 = P - (R2 - S1)
As prices continually rotate to enhance trading, prices of perceived value (support) and perceived over valuation (resistance) can be recognized by the volume of activity at different price levels. This is the basis of Market ProfileTM (MP) analysis. Distinct patterns of volume and price behaviour can be recognized using MP profiles.
MP illustrates that the majority of trading in a day is by floor traders or "locals" as they are called. These locals constantly take prices up and down to very short term levels of support and resistance, exploring the narrow limits of price/valuation tolerance. Trading for the day will persist between this narrow range unless "outside" buyers and sellers are attracted to the price changes that occur. If the narrow range of support or resistance established by the floor traders can be wrestled from them, then off floor short term traders will be attracted and enter the market, as buyers if short term resistance is overcome or as sellers if short term support is violated. These breakout points then usually reverse their function and serve as test points, i.e. previous resistance becomes support and previous support becomes resistance.
Now the active range of trading expands as the off floor traders enter the fray. If more longer established support and resistance can be successfully breached during the new short term trend that emerges, with the activity of the off floor traders, then longer term traders, position traders, with an intermediate or long term intention of their market commitment will be attracted to join the market.
Wednesday, August 26, 2009
VIX , OIL VIX
article dated: April 29, 2008
Ten Things Everyone Should Know About the VIX
Both measures tend to rise when the underlying value they track falls. The VIX tracks the Standard & Poor's 500, while the Oil VIX tracks the United States Oil Fund ETF (AMEX: USO).
I have had quite a few requests to present some introductory material on the VIX, so with that in mind I offer up the following in question and answer format:
Q: What is the VIX?
A: In brief, the VIX is the ticker symbol for the volatility index that the Chicago Board Options Exchange (CBOE) uses to calculate the implied volatility of options on the S&P 500 index (SPX) for the next 30 days. The formal name of the VIX is the CBOE Volatility Index.
Q: How is the VIX calculated?
A: The CBOE utilizes a wide variety of strike prices for SPX puts and calls to calculate the VIX. In order to arrive at a 30 day implied volatility value, the calculation blends options expiring on two different dates, with the result being an interpolated implied volatility number. For the record, the CBOE does not use the Black-Scholes option pricing model. Details of the VIX calculations are available from the CBOE in their VIX white paper.
Q: Why should I care about the VIX?
A: There are several reasons to pay attention to the VIX. Most investors who monitor the VIX do so because it provides important information about investor sentiment that can be helpful in evaluating potential market turning points. A smaller group of investors use VIX options and VIX futures to hedge their portfolios; other investors use those same options and futures to speculate on the future direction of the market.
Q: What is the history of the VIX?
A: The VIX was originally launched in 1993, with a slightly different calculation than the one that is currently employed. The ‘original VIX’ (which is still tracked under the ticker VXO) differs from the current VIX in two main respects: it is based on the S&P 100 (OEX) instead of the S&P 500; and it targets at the money options instead of the broad range of strikes utilized by the VIX. The current VIX was reformulated on September 22, 2003, at which time the original VIX was assigned the VXO ticker. VIX futures began trading on March 26, 2004 and VIX options followed on February 24, 2006.
Q: Why is the VIX sometimes called the “fear index”?
A: The CBOE has actively encouraged the use of the VIX as a tool for measuring investor fear in their marketing of the VIX and VIX-related products. As the CBOE puts it, “since volatility often signifies financial turmoil, [the] VIX is often referred to as the ‘investor fear gauge’”. The media has been quick to latch onto the headline value of the VIX as a fear indicator and has helped to reinforce the relationship between the VIX and investor fear.
Q: How does the VIX differ from other measures of volatility?
A: The VIX is the most widely known of a number of volatility indices. The CBOE alone recognizes nine volatility indices, the most popular of which are the VIX, the VXO, the VXN (for the NASDAQ-100 index), and the RVX (for the Russell 2000 small cap index). In addition to volatility indices for US equities, there are volatility indices for foreign equities (VDAX, VSTOXX, VSMI, VX1, MVX, VAEX, VBEL, VCAC, etc.) as well as lesser known volatility indices for other asset classes such as oil, gold and currencies.
Q: What are normal, high and low readings for the VIX?
A: This question is more complicated than it sounds, because some people focus on absolute VIX numbers and some people focus on relative VIX numbers. On an absolute basis, looking at a VIX as reformulated in 2003, but using data reverse engineered going back to 1990, the mean is a little bit over 20, the high is just below 90 and the low is just below 10. Just for fun, using the VXO (original VIX formulation), it is possible to calculate that the VXO peaked at about 172 on Black Monday, October 19, 1987.
Q: Can I trade the VIX?
A: At this time it is not possible to trade the cash or spot VIX directly. The only way to take a position on the VIX is through the use of VIX options and futures. On 1/30/09, Barclays Capital launched two new VIX ETNs that are based on VIX futures: VXX, which targets VIX futures with 1 month to maturity; and VXZ, which targets 5 months to maturity.
Q: How can the VIX be used as a hedge?
A: The VIX is appropriate as a hedging tool because it has a strong negative correlation to the SPX – and is generally about four times more volatile. For this reason, portfolio managers often find that buying of out of the money calls on the VIX to be a relatively inexpensive way to hedge long portfolio positions. Similar hedges can be constructed using VIX futures.
Q: How do investors use the VIX to time the market?
A: This is a subject for a much larger space, but in general, the VIX tends to trend in the very short-term, mean-revert over the short to intermediate term, and move in cycles over a long-term time frame. The devil, of course, is in the details.
----------------
The VIX isn’t Magical
24Jul08
------------
--------------
New Normal for the Oil VIX: High Levels of Fear
Much like its stock market counterpart, the Oil VIX is showing a high level of uncertainty among investors as efforts intensify for stronger regulation of energy trading.
Though well off its historic highs, the Chicago Board Options Exchange Oil VIX, or volatility index, is reflecting a strong probability of substantial price fluctuation at a time of loud public clamor over rising energy prices.
But while proponents of a stronger government hand in regulating fuel prices are using oil volatility as a factor to bolster their case, the surge in the Oil VIX may well be just another metric in the "new normal" of rapid market swings.
"It’s brutal, but it's today’s reality," said Darin Newsom, energy analyst for DTN in Omaha, Neb. "It wreaks havoc, but it places more emphasis on risk management. It places more emphasis on looking at the structure of these markets rather than following whichever winds are blowing on a particular day."
An Oil VIX above 50 sounds alarming, just as a stock market VIX above 30 sounded alarming at one point. Yet stocks have managed to sustain a powerful rally over the past three months even as the so-called "fear index" has stayed above what had long been considered a benchmark reading for high volatility.
Both measures tend to rise when the underlying value they track falls. The VIX tracks the Standard & Poor's 500, while the Oil VIX tracks the United States Oil Fund ETF (AMEX: USO).
Consequently, the Oil VIX, a relatively recent addition to the CBOE, has been on a general downward trend since last December, when crude prices reached their most recent low and started rebounding.
The unpredictability of oil prices are at the center of a lively debate on whether trading ought to be more tightly regulated in order to counter the much-maligned speculators, who have been blamed for a summertime pop in gasoline prices that seems to be unsupported by demand fundamentals.
"This is not what the commodity markets were designed to do," oil trader Daniel Dicker told CNBC. "They were never designed to be investment vehicles. They were designed to be price discovery mechanisms, and we’ve lost that trend now."
The powerful influence of speculators—primarily institutional investors and other deep-pocketed traders with the power to move markets—has long been blamed for moves such as oil's jump to $147 last summer, and gasoline's leap to $4 a gallon.
With the drumbeat for change accelerating and the mood in the new administration much more amenable to regulation, the Commodity Futures Trading Commission said Tuesday it is considering measures to clamp down on oil trading.
Some traders say a crackdown on speculation will curb the oil trade, add to the current selloff in prices and essentially amount to overkill tactics for a problem that isn’t as big as it seems.
"I don’t think there are effective ways for government to get involved and fix this," Dicker said.
Newsom added that the markets are actually behaving the way they should, generating harsh pullbacks when prices get too high such as during last year’s oil boom, and bouncing up when prices get too low, as in December’s plunge below $34 a barrel.
But should the market be going to such extremes?
"Our notions of high, low, weak, strong have changed," he said. "What used to be incredibly high volatility is not any more. It’s just natural for a market to continue to grow and evolve like that."
As for popular market measures, investors may have to widen their "normal" parameters to higher highs and lower lows, with the hope that a true price emerges in between.
An Oil VIX above 50, for instance, doesn't merely represent the threat of a move higher, but rather indicates that traders are concerned about unpredictable moves either way. At the same time, the Oil VIX has been a somewhat less reliable predictor considering it is barely a year old and lacks the history to establish reliable benchmarks.
"There's risk in both directions," said one oil trader at the CBOE who asked not to be named. "I think what it is measuring is there's a growing amount of bimodal thinking on this."
Yet the Oil VIX is about half its level from December, also indicating that traders believe the worst of the volatility has passed and that trading is more likely now to find a range.
"As a consumer in an economy that I know isn't recovering too well, it's very frustrating to watch the price of gas go up at the pump," said Andrew Wilkinson, senior strategist at Interactive Brokers. "Maybe now the fundamental forces will reassert their pressure and bring crude prices down to where [they] should be."
------------
Using the oil VIX to forecast energy prices
Wednesday, 13 August 2008 13:53
The VIX is a great tool for understanding investor sentiment relative to stocks. Traders were able to use the VIX to predict the most recent rally in stocks in June. If you are interested in understanding investor sentiment in other markets through a volatility index like the VIX then this article is for you. The formula used to derive the VIX's values can be applied to just about any widely traded index option and that includes oil futures options.
Oil prices have a version of the VIX called the Oil VIX (OVX) that operates the same way the stocks version does. When the oil VIX hits extremes oil prices become more prone to reversals. Unlike equities however, the oil VIX is positively correlated with oil prices because higher risk levels will increase oil prices rather than discount them. In the video, I will show you how the channel between extremes in oil market sentiment accurately predicted changes in the price trend of oil itself through 2008.
This is particularly useful now as the oil VIX is approaching another inflection point making an oil price increase more likely. This is helpful for all traders because of the intermarket affects of an increase in oil prices. Higher energy costs will be a bad thing for stocks, good for bonds, bad for the USD and great for commodity currencies. The oil VIX is one more way to manage risk and increase profit opportunities. oil
-----------
Ten Things Everyone Should Know About the VIX
Both measures tend to rise when the underlying value they track falls. The VIX tracks the Standard & Poor's 500, while the Oil VIX tracks the United States Oil Fund ETF (AMEX: USO).
I have had quite a few requests to present some introductory material on the VIX, so with that in mind I offer up the following in question and answer format:
Q: What is the VIX?
A: In brief, the VIX is the ticker symbol for the volatility index that the Chicago Board Options Exchange (CBOE) uses to calculate the implied volatility of options on the S&P 500 index (SPX) for the next 30 days. The formal name of the VIX is the CBOE Volatility Index.
Q: How is the VIX calculated?
A: The CBOE utilizes a wide variety of strike prices for SPX puts and calls to calculate the VIX. In order to arrive at a 30 day implied volatility value, the calculation blends options expiring on two different dates, with the result being an interpolated implied volatility number. For the record, the CBOE does not use the Black-Scholes option pricing model. Details of the VIX calculations are available from the CBOE in their VIX white paper.
Q: Why should I care about the VIX?
A: There are several reasons to pay attention to the VIX. Most investors who monitor the VIX do so because it provides important information about investor sentiment that can be helpful in evaluating potential market turning points. A smaller group of investors use VIX options and VIX futures to hedge their portfolios; other investors use those same options and futures to speculate on the future direction of the market.
Q: What is the history of the VIX?
A: The VIX was originally launched in 1993, with a slightly different calculation than the one that is currently employed. The ‘original VIX’ (which is still tracked under the ticker VXO) differs from the current VIX in two main respects: it is based on the S&P 100 (OEX) instead of the S&P 500; and it targets at the money options instead of the broad range of strikes utilized by the VIX. The current VIX was reformulated on September 22, 2003, at which time the original VIX was assigned the VXO ticker. VIX futures began trading on March 26, 2004 and VIX options followed on February 24, 2006.
Q: Why is the VIX sometimes called the “fear index”?
A: The CBOE has actively encouraged the use of the VIX as a tool for measuring investor fear in their marketing of the VIX and VIX-related products. As the CBOE puts it, “since volatility often signifies financial turmoil, [the] VIX is often referred to as the ‘investor fear gauge’”. The media has been quick to latch onto the headline value of the VIX as a fear indicator and has helped to reinforce the relationship between the VIX and investor fear.
Q: How does the VIX differ from other measures of volatility?
A: The VIX is the most widely known of a number of volatility indices. The CBOE alone recognizes nine volatility indices, the most popular of which are the VIX, the VXO, the VXN (for the NASDAQ-100 index), and the RVX (for the Russell 2000 small cap index). In addition to volatility indices for US equities, there are volatility indices for foreign equities (VDAX, VSTOXX, VSMI, VX1, MVX, VAEX, VBEL, VCAC, etc.) as well as lesser known volatility indices for other asset classes such as oil, gold and currencies.
Q: What are normal, high and low readings for the VIX?
A: This question is more complicated than it sounds, because some people focus on absolute VIX numbers and some people focus on relative VIX numbers. On an absolute basis, looking at a VIX as reformulated in 2003, but using data reverse engineered going back to 1990, the mean is a little bit over 20, the high is just below 90 and the low is just below 10. Just for fun, using the VXO (original VIX formulation), it is possible to calculate that the VXO peaked at about 172 on Black Monday, October 19, 1987.
Q: Can I trade the VIX?
A: At this time it is not possible to trade the cash or spot VIX directly. The only way to take a position on the VIX is through the use of VIX options and futures. On 1/30/09, Barclays Capital launched two new VIX ETNs that are based on VIX futures: VXX, which targets VIX futures with 1 month to maturity; and VXZ, which targets 5 months to maturity.
Q: How can the VIX be used as a hedge?
A: The VIX is appropriate as a hedging tool because it has a strong negative correlation to the SPX – and is generally about four times more volatile. For this reason, portfolio managers often find that buying of out of the money calls on the VIX to be a relatively inexpensive way to hedge long portfolio positions. Similar hedges can be constructed using VIX futures.
Q: How do investors use the VIX to time the market?
A: This is a subject for a much larger space, but in general, the VIX tends to trend in the very short-term, mean-revert over the short to intermediate term, and move in cycles over a long-term time frame. The devil, of course, is in the details.
----------------
The VIX isn’t Magical
24Jul08
------------
--------------
New Normal for the Oil VIX: High Levels of Fear
Much like its stock market counterpart, the Oil VIX is showing a high level of uncertainty among investors as efforts intensify for stronger regulation of energy trading.
Though well off its historic highs, the Chicago Board Options Exchange Oil VIX, or volatility index, is reflecting a strong probability of substantial price fluctuation at a time of loud public clamor over rising energy prices.
But while proponents of a stronger government hand in regulating fuel prices are using oil volatility as a factor to bolster their case, the surge in the Oil VIX may well be just another metric in the "new normal" of rapid market swings.
"It’s brutal, but it's today’s reality," said Darin Newsom, energy analyst for DTN in Omaha, Neb. "It wreaks havoc, but it places more emphasis on risk management. It places more emphasis on looking at the structure of these markets rather than following whichever winds are blowing on a particular day."
An Oil VIX above 50 sounds alarming, just as a stock market VIX above 30 sounded alarming at one point. Yet stocks have managed to sustain a powerful rally over the past three months even as the so-called "fear index" has stayed above what had long been considered a benchmark reading for high volatility.
Both measures tend to rise when the underlying value they track falls. The VIX tracks the Standard & Poor's 500, while the Oil VIX tracks the United States Oil Fund ETF (AMEX: USO).
Consequently, the Oil VIX, a relatively recent addition to the CBOE, has been on a general downward trend since last December, when crude prices reached their most recent low and started rebounding.
The unpredictability of oil prices are at the center of a lively debate on whether trading ought to be more tightly regulated in order to counter the much-maligned speculators, who have been blamed for a summertime pop in gasoline prices that seems to be unsupported by demand fundamentals.
"This is not what the commodity markets were designed to do," oil trader Daniel Dicker told CNBC. "They were never designed to be investment vehicles. They were designed to be price discovery mechanisms, and we’ve lost that trend now."
The powerful influence of speculators—primarily institutional investors and other deep-pocketed traders with the power to move markets—has long been blamed for moves such as oil's jump to $147 last summer, and gasoline's leap to $4 a gallon.
With the drumbeat for change accelerating and the mood in the new administration much more amenable to regulation, the Commodity Futures Trading Commission said Tuesday it is considering measures to clamp down on oil trading.
Some traders say a crackdown on speculation will curb the oil trade, add to the current selloff in prices and essentially amount to overkill tactics for a problem that isn’t as big as it seems.
"I don’t think there are effective ways for government to get involved and fix this," Dicker said.
Newsom added that the markets are actually behaving the way they should, generating harsh pullbacks when prices get too high such as during last year’s oil boom, and bouncing up when prices get too low, as in December’s plunge below $34 a barrel.
But should the market be going to such extremes?
"Our notions of high, low, weak, strong have changed," he said. "What used to be incredibly high volatility is not any more. It’s just natural for a market to continue to grow and evolve like that."
As for popular market measures, investors may have to widen their "normal" parameters to higher highs and lower lows, with the hope that a true price emerges in between.
An Oil VIX above 50, for instance, doesn't merely represent the threat of a move higher, but rather indicates that traders are concerned about unpredictable moves either way. At the same time, the Oil VIX has been a somewhat less reliable predictor considering it is barely a year old and lacks the history to establish reliable benchmarks.
"There's risk in both directions," said one oil trader at the CBOE who asked not to be named. "I think what it is measuring is there's a growing amount of bimodal thinking on this."
Yet the Oil VIX is about half its level from December, also indicating that traders believe the worst of the volatility has passed and that trading is more likely now to find a range.
"As a consumer in an economy that I know isn't recovering too well, it's very frustrating to watch the price of gas go up at the pump," said Andrew Wilkinson, senior strategist at Interactive Brokers. "Maybe now the fundamental forces will reassert their pressure and bring crude prices down to where [they] should be."
------------
Using the oil VIX to forecast energy prices
Wednesday, 13 August 2008 13:53
The VIX is a great tool for understanding investor sentiment relative to stocks. Traders were able to use the VIX to predict the most recent rally in stocks in June. If you are interested in understanding investor sentiment in other markets through a volatility index like the VIX then this article is for you. The formula used to derive the VIX's values can be applied to just about any widely traded index option and that includes oil futures options.
Oil prices have a version of the VIX called the Oil VIX (OVX) that operates the same way the stocks version does. When the oil VIX hits extremes oil prices become more prone to reversals. Unlike equities however, the oil VIX is positively correlated with oil prices because higher risk levels will increase oil prices rather than discount them. In the video, I will show you how the channel between extremes in oil market sentiment accurately predicted changes in the price trend of oil itself through 2008.
This is particularly useful now as the oil VIX is approaching another inflection point making an oil price increase more likely. This is helpful for all traders because of the intermarket affects of an increase in oil prices. Higher energy costs will be a bad thing for stocks, good for bonds, bad for the USD and great for commodity currencies. The oil VIX is one more way to manage risk and increase profit opportunities. oil
-----------
Friday, August 21, 2009
Sunday, August 16, 2009
Tradestation Indicators , easylanguage
----------
this action I took the 14-day ADX of the SPX (15.56) and divided it by the 14-day historical volatility (volatilitystddev in Tradestation terms), which currently stands at 0.3023. The result (about 51) is what I call trend over volatility (TOV)
asr: see if this DMI or DV/CI is useful for our OIL
asr: alchamy trendcatcher should have all these coded, we only need to back test at this stage developed ones ( like alchamy ) no new indicator search.
directional movement indicator
DMI Points The Way To Profits
http://www.investopedia.com/articles/technical/02/050602.asp
http://www.esignalcentral.com/university/esignal/addons/hamzei/hamzei.pdf
http://www.traderslog.com/static/pdfs/DV_CI_4_DL.pdf
as stated in the above URL
The premise behind the Directional Volatility Indicator is based on the widely
researched and well documented fact that: It is much easier to predict the volatility
cycles than it is to predict the price cycles for a given asset. Simply put, volatility tends
to contract and expand with reasonable cyclicality where price doesn’t.
----
asr: created with stockcharts.com , look a overlay 'price by volume' under parabolic SAR in list
1) once MA(50) crossed MA(200) for USO it never breached , the cross happened after OIL meltdown in MAY . interesting the meltdown did not happen after MA crossovers it happened it could have been big techical breach because once OIL recover starts MA(50) crossed over MA(200) on upside , crossing down below is big technical breach ( similar to 2003/2009 S&P MA crossovers )
2) most of the time price last 2 months maintained above MA(50) which is 35.0 for USO
3) for actual USO/crude futures trading we can use stockcharts.com charts live version ($30/month ) if we need to use live charts ( do not worry about not having in TS or somebody may develop easily in TS since they are simple horizantal lines )
4) see if we alchamy guy can develop above for TS
5) see if we can develop a 'trading stragegy' for TS based on this PBV price By Volume as indicator and back test it
----------
PBV price by volume
Gauging
Support And Resistance With Price By Volume (PBV )
asr: notice the charts are created with stockcharts.com where as all other investopedia charts are created with tradestation. it shows tradestation may not have this facility to draw PBV lines
1. Draw two parallel, horizontal lines that connect parallel highs and lows in a trading range after a trending move.
2. Then, use the PBV histogram to see if these parallel lines are located near key price levels.
3. Finally, note the buying or selling pressure (colors) as well as the total volume to determine in which direction a breakout is likely to occur.
Volume Oscillator Confirms Price Movements
--------
money flow indicators
https://www.tradestation.com/discussions/Topic.aspx?Topic_ID=45534
http://www.investopedia.com/articles/technical/03/072303.asp
price distribution analysis
http://www.tradestationzone.com/default.aspx?PageID=101&CatID=3
-------------
intraday data for ES S&P emini .. I have file also in gmail acct
http://www.fin-rus.com/analysis/export/_eng_/default.asp
http://kreslik.com/forums/viewtopic.php?t=92 -- all free Intraday DATA sites
--------------
free easylanguage code
use this PMSM 3 band indicator to get the CODE basis to draw OIL, S&P, EURUSD by using one instrument for each bottom color CODE
http://kreslik.com/forums/printview.php?t=380&start=60
we can develop OIL, S&P, EURUSD some thing like below " alchmy universal " to find whenever EURO ,S&P changes OIL price change is coming Soon ..
Alchemy Universal Divergence Indicator
The Alchemy Universal Divergence indicator can be used to detect divergence as follows:
Divergence between price and any specified oscillator
Divergence between 2 different price series
Divergence between 2 specified oscillators
Here are some other features of this indicator:
Divergence can be specified as regular divergence, opposite divergence or reverse divergence.
The divergence can be displayed as show me dots above/below price or it can be plotted as oscillator with its corresponding divergence dots.
Either, divergence pivot and previous pivot that the divergence is measured from can be displayed and the indicator can connect the 2 price pivots with trend lines.
-----------
easylanguage this PDF has all essential code for strategy
https://www.tradestation.com/support/books/pdf/EL_Essentials.pdf
we can get some strategies CODE from this site
http://www.tssupport.com/support/base/?action=article&id=1397 -- this has code filter for strategy
asr: this tssupport site gives good simple code , it shows the power of easy language for developing 'indicators' or 'strategies '
-- good simple strategy code
Strategy : Simple moving avarge SMA
http://www.tssupport.com/support/base/?action=article&id=1239
This is an example of trendline breakout system .
http://www.tssupport.com/support/base/?action=article&id=1325
Range Breakout Trading in Treasury Bonds
StoCastics strategy
http://www.tssupport.com/support/base/?action=article&id=1428
http://forum.tssupport.com/viewtopic.php?t=3339
http://kreslik.com/forums/viewforum.php?f=10 -- this has lots of CODE
http://www.tssupport.com/support/base/?action=article&id=1397 -- filter it
http://www.davenewberg.com/Trading/TSCode.html
http://www.davenewberg.com/Trading/TS_Code/SuriD_Codes/3-4_Bar_Strat_Filters.html -- seems complete strategy code
I suggest gathering links to EasyLanguage scripts' collections in this thread. Such places are numerous on the Internet and if we gather them all in one place it will be easier to quickly find something useful and helpful.
kreslik.com - Traders Community
http://kreslik.com/forums/viewforum.php?f=10
Traders Laboratory
http://www.traderslaboratory.com/forums/f46/
TS SUPPORT
http://www.tssupport.com/support/base/?action=search&pid=13&string=
TradeStation.com
https://www.tradestation.com/support/NavTrack/default.asp?code=213
------------------------
support/resistance S1/R1 see attached code ..
by ABC Trading Group
This must be the best Floor Trader Pivots implementation I have seen.
------------
easy language low priced code, site says you get ELD for small price , confirm ELD means source code
http://www.markplex.com/tutorials.php
-----------
Support and Resistance Pivot Points
http://www.tradingalchemy.com/ViewChartsSupportResistance.htm
- Rolling Pivots - http://www.tradingalchemy.com/ViewChartsRollingFTPivots.htm
- Trailing Stop
asr note: this simple $100 tool gives S/R for last day , 2 day , week it is very useful and also note Pivots ..
- if you combine these pivots with RSI, stochastic divergence signal (arrows )
- combine this S/R for daily/weekly with VP phigh/low is very useful to get an idea
-----------------
LIVE trade calls , Market commentary , market insight etc...
asr note: this traderinsight seems more intraday calls subscription than t3live
http://www.traderinsight.com/
LIVE trade commentary
trade commentary , this t3live site seems ok , for $50 you have daily commentary for $250 you have live trading ROOM . This Scott guy appeared on CNBC , bloomberg so he has some credit since appeared on main channels ( again remember Excell futures guy also apperaed on CBC for OIL )
https://t3live.com/index.php
asr: observations :
1) this guy has daily BLOG post that is good , and videos on T3live site shows almost video of T3Live guy on CNBC etc.. almost twice a month from 2008 JUNE to 2009 AUG so this guy seems bit authentic
2) JUNE 8 th post he called 'long rally is hard , SP dropped next week
3) JULY 10 post he called to no more short after SP reached 950 , it raised later weeks . based on those 2 he seems OK , some thing to rely ON ..
4) Here is T3live daily list for 'the Day trade' , it has SPY which is S&P , blog post url is below , 'the day trade list' Image is below that .
http://blog.t3live.com/search?updated-min=2009-01-01T00%3A00%3A00-05%3A00&updated-max=2010-01-01T00%3A00%3A00-05%3A00&max-results=50
https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjDfuX-0iSrzEWIXCWA2SluwsIWdLAI5ohYd30Pit0KyKi-2DeIsSzhRXLQteemg4QjhClUGGZXAod7-bb92PNaNvVjIjY5p5JGrpBpl-uhsTj9sEJWTMibZs3iCGdyHL2NeswAyoekauI/s1600-h/MorningGameplan6-8-09.xls
-------------------
asr: interesting at this presentation, author shows a tradeSetup with 'downward reversal' followed by ' 4 day up days' etc.. and tests on S&P 500 chart for '27 years' and gets result. it shows 90 trades over 27 years . It is intresting to Learn this SETUP for our OIL trading ...
http://www.traderinsight.com/Videos/Art/082509/082509.html
asr: notice , these professional traders use TRADEStation ( as shown in back result page) , It seems tradeStation is popular ( and easy setup and back test) for professional traders and normal.
- If you have a trade account , basicallly platform is Free and DATA feed you have to pay with any platform
- if no trade account go with multicharts else tardestation . But the Alchamy guy told all their indicators come with system ID , so they work only with either Tradestation or multicharts .
-------
A 10-Day Trading System
- asr: it seems we can test very easily this kind of setup in TradeStation/Multicharts
The 10-day lows are, by far, more useful then the 10-day highs. Since 1980, the 10-day lows have been an accurate predictor of short-term gains on the SPX index about 62% percent of the time. Simply buying the morning after a low signal and holding for exactly 5 days each time, as described above, would have yielded a gain of around 120% for the 26 year time period, and that is without reinvesting profits.
---------
Use the Right Technical Tools When You Trade
Oscillators are great tools in a range-trading environment, characterized by short-lived swings (sometimes on the order of days) and quick reversals. Which oscillators have we used with success? Stochastics, Wilder's Relative Strength Index (not the 'relative strength' indicator), and Wilder's parabolic SAR.
Tools such as moving average convergence divergence (MACD), ADX/DMI, and moving average crossovers are more apt to give good signals in a trending (momentum) environment, such as the middle of 2002 (to learn more about these momentum indicators, click here). However, these trend tools are somewhat ineffective in a range-trading environment
------------
this action I took the 14-day ADX of the SPX (15.56) and divided it by the 14-day historical volatility (volatilitystddev in Tradestation terms), which currently stands at 0.3023. The result (about 51) is what I call trend over volatility (TOV)
asr: see if this DMI or DV/CI is useful for our OIL
asr: alchamy trendcatcher should have all these coded, we only need to back test at this stage developed ones ( like alchamy ) no new indicator search.
directional movement indicator
DMI Points The Way To Profits
http://www.investopedia.com/articles/technical/02/050602.asp
http://www.esignalcentral.com/university/esignal/addons/hamzei/hamzei.pdf
http://www.traderslog.com/static/pdfs/DV_CI_4_DL.pdf
as stated in the above URL
The premise behind the Directional Volatility Indicator is based on the widely
researched and well documented fact that: It is much easier to predict the volatility
cycles than it is to predict the price cycles for a given asset. Simply put, volatility tends
to contract and expand with reasonable cyclicality where price doesn’t.
----
asr: created with stockcharts.com , look a overlay 'price by volume' under parabolic SAR in list
1) once MA(50) crossed MA(200) for USO it never breached , the cross happened after OIL meltdown in MAY . interesting the meltdown did not happen after MA crossovers it happened it could have been big techical breach because once OIL recover starts MA(50) crossed over MA(200) on upside , crossing down below is big technical breach ( similar to 2003/2009 S&P MA crossovers )
2) most of the time price last 2 months maintained above MA(50) which is 35.0 for USO
3) for actual USO/crude futures trading we can use stockcharts.com charts live version ($30/month ) if we need to use live charts ( do not worry about not having in TS or somebody may develop easily in TS since they are simple horizantal lines )
4) see if we alchamy guy can develop above for TS
5) see if we can develop a 'trading stragegy' for TS based on this PBV price By Volume as indicator and back test it
----------
PBV price by volume
Gauging
Support And Resistance With Price By Volume (PBV )
asr: notice the charts are created with stockcharts.com where as all other investopedia charts are created with tradestation. it shows tradestation may not have this facility to draw PBV lines
1. Draw two parallel, horizontal lines that connect parallel highs and lows in a trading range after a trending move.
2. Then, use the PBV histogram to see if these parallel lines are located near key price levels.
3. Finally, note the buying or selling pressure (colors) as well as the total volume to determine in which direction a breakout is likely to occur.
Volume Oscillator Confirms Price Movements
--------
money flow indicators
https://www.tradestation.com/discussions/Topic.aspx?Topic_ID=45534
http://www.investopedia.com/articles/technical/03/072303.asp
price distribution analysis
http://www.tradestationzone.com/default.aspx?PageID=101&CatID=3
-------------
intraday data for ES S&P emini .. I have file also in gmail acct
http://www.fin-rus.com/analysis/export/_eng_/default.asp
http://kreslik.com/forums/viewtopic.php?t=92 -- all free Intraday DATA sites
--------------
free easylanguage code
use this PMSM 3 band indicator to get the CODE basis to draw OIL, S&P, EURUSD by using one instrument for each bottom color CODE
http://kreslik.com/forums/printview.php?t=380&start=60
we can develop OIL, S&P, EURUSD some thing like below " alchmy universal " to find whenever EURO ,S&P changes OIL price change is coming Soon ..
Alchemy Universal Divergence Indicator
The Alchemy Universal Divergence indicator can be used to detect divergence as follows:
Divergence between price and any specified oscillator
Divergence between 2 different price series
Divergence between 2 specified oscillators
Here are some other features of this indicator:
Divergence can be specified as regular divergence, opposite divergence or reverse divergence.
The divergence can be displayed as show me dots above/below price or it can be plotted as oscillator with its corresponding divergence dots.
Either, divergence pivot and previous pivot that the divergence is measured from can be displayed and the indicator can connect the 2 price pivots with trend lines.
-----------
easylanguage this PDF has all essential code for strategy
https://www.tradestation.com/support/books/pdf/EL_Essentials.pdf
we can get some strategies CODE from this site
http://www.tssupport.com/support/base/?action=article&id=1397 -- this has code filter for strategy
asr: this tssupport site gives good simple code , it shows the power of easy language for developing 'indicators' or 'strategies '
-- good simple strategy code
Strategy : Simple moving avarge SMA
http://www.tssupport.com/support/base/?action=article&id=1239
This is an example of trendline breakout system .
http://www.tssupport.com/support/base/?action=article&id=1325
Range Breakout Trading in Treasury Bonds
StoCastics strategy
http://www.tssupport.com/support/base/?action=article&id=1428
http://forum.tssupport.com/viewtopic.php?t=3339
http://kreslik.com/forums/viewforum.php?f=10 -- this has lots of CODE
http://www.tssupport.com/support/base/?action=article&id=1397 -- filter it
http://www.davenewberg.com/Trading/TSCode.html
http://www.davenewberg.com/Trading/TS_Code/SuriD_Codes/3-4_Bar_Strat_Filters.html -- seems complete strategy code
I suggest gathering links to EasyLanguage scripts' collections in this thread. Such places are numerous on the Internet and if we gather them all in one place it will be easier to quickly find something useful and helpful.
kreslik.com - Traders Community
http://kreslik.com/forums/viewforum.php?f=10
Traders Laboratory
http://www.traderslaboratory.com/forums/f46/
TS SUPPORT
http://www.tssupport.com/support/base/?action=search&pid=13&string=
TradeStation.com
https://www.tradestation.com/support/NavTrack/default.asp?code=213
------------------------
support/resistance S1/R1 see attached code ..
by ABC Trading Group
This must be the best Floor Trader Pivots implementation I have seen.
------------
easy language low priced code, site says you get ELD for small price , confirm ELD means source code
http://www.markplex.com/tutorials.php
-----------
Support and Resistance Pivot Points
http://www.tradingalchemy.com/ViewChartsSupportResistance.htm
- Rolling Pivots - http://www.tradingalchemy.com/ViewChartsRollingFTPivots.htm
- Trailing Stop
asr note: this simple $100 tool gives S/R for last day , 2 day , week it is very useful and also note Pivots ..
- if you combine these pivots with RSI, stochastic divergence signal (arrows )
- combine this S/R for daily/weekly with VP phigh/low is very useful to get an idea
-----------------
LIVE trade calls , Market commentary , market insight etc...
asr note: this traderinsight seems more intraday calls subscription than t3live
http://www.traderinsight.com/
LIVE trade commentary
trade commentary , this t3live site seems ok , for $50 you have daily commentary for $250 you have live trading ROOM . This Scott guy appeared on CNBC , bloomberg so he has some credit since appeared on main channels ( again remember Excell futures guy also apperaed on CBC for OIL )
https://t3live.com/index.php
asr: observations :
1) this guy has daily BLOG post that is good , and videos on T3live site shows almost video of T3Live guy on CNBC etc.. almost twice a month from 2008 JUNE to 2009 AUG so this guy seems bit authentic
2) JUNE 8 th post he called 'long rally is hard , SP dropped next week
3) JULY 10 post he called to no more short after SP reached 950 , it raised later weeks . based on those 2 he seems OK , some thing to rely ON ..
4) Here is T3live daily list for 'the Day trade' , it has SPY which is S&P , blog post url is below , 'the day trade list' Image is below that .
http://blog.t3live.com/search?updated-min=2009-01-01T00%3A00%3A00-05%3A00&updated-max=2010-01-01T00%3A00%3A00-05%3A00&max-results=50
https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjDfuX-0iSrzEWIXCWA2SluwsIWdLAI5ohYd30Pit0KyKi-2DeIsSzhRXLQteemg4QjhClUGGZXAod7-bb92PNaNvVjIjY5p5JGrpBpl-uhsTj9sEJWTMibZs3iCGdyHL2NeswAyoekauI/s1600-h/MorningGameplan6-8-09.xls
-------------------
asr: interesting at this presentation, author shows a tradeSetup with 'downward reversal' followed by ' 4 day up days' etc.. and tests on S&P 500 chart for '27 years' and gets result. it shows 90 trades over 27 years . It is intresting to Learn this SETUP for our OIL trading ...
http://www.traderinsight.com/Videos/Art/082509/082509.html
asr: notice , these professional traders use TRADEStation ( as shown in back result page) , It seems tradeStation is popular ( and easy setup and back test) for professional traders and normal.
- If you have a trade account , basicallly platform is Free and DATA feed you have to pay with any platform
- if no trade account go with multicharts else tardestation . But the Alchamy guy told all their indicators come with system ID , so they work only with either Tradestation or multicharts .
-------
A 10-Day Trading System
- asr: it seems we can test very easily this kind of setup in TradeStation/Multicharts
The 10-day lows are, by far, more useful then the 10-day highs. Since 1980, the 10-day lows have been an accurate predictor of short-term gains on the SPX index about 62% percent of the time. Simply buying the morning after a low signal and holding for exactly 5 days each time, as described above, would have yielded a gain of around 120% for the 26 year time period, and that is without reinvesting profits.
---------
Use the Right Technical Tools When You Trade
Oscillators are great tools in a range-trading environment, characterized by short-lived swings (sometimes on the order of days) and quick reversals. Which oscillators have we used with success? Stochastics, Wilder's Relative Strength Index (not the 'relative strength' indicator), and Wilder's parabolic SAR.
Tools such as moving average convergence divergence (MACD), ADX/DMI, and moving average crossovers are more apt to give good signals in a trending (momentum) environment, such as the middle of 2002 (to learn more about these momentum indicators, click here). However, these trend tools are somewhat ineffective in a range-trading environment
------------
Thursday, August 13, 2009
ETF
---
The Definitive Oil ETF Guide: List of Oil ETFs and More
asr: see other blog of hardassertsinvesting about 3-1-1 , 2-1-1 OIL cracks with ETF .. 'gosoline' ETF UGA , heating oil ETF UHN are easy way to do it this cracks as seasonal from SEPT to MARCH and then reverse.
Ticker ETF Underlying Commodity
UNG United States Natural Gas Fund Natural Gas
USO United States Oil Fund West Texas Intermediate Crude Oil
UGA United States Gasoline Fund Gasoline
DBO PowerShares DB Oil Fund West Texas Intermediate Crude Oil
UHN United States Heating Oil Fund Heating Oil
-----
ETF big list
ETF Trends: Dollar, Commodities Continue See-Saw Game
note: this has all the sectors etc..
Commodity ETFs-------------
Why Everything You’ve Heard About Leveraged ETFs Is Wrong
by Michael Johnston on August 4, 2009 | Tagged as: RSU • RSW • SDS • TZA
http://etfdb.com/2009/why-everything-youve-heard-about-leveraged-etfs-is-wrong/
Below are daily volumes (in millions of shares) for two of the most popular leveraged ETFs Direxion TZA , ProShares SDS
http://www.direxionshares.com/etfs
http://www.proshares.com/funds?products=&fundType=
About: Launched in 2006, ProShares, which is part of ProFunds Group, is the world's largest manager of short and leveraged funds.
ProShares UltraShort and UltraLong ETF
ProShares ETF List
UltraShort ProShares ETFs: 24 Ways to Benefit From Going Short
Proshares :- seems there is NO offer of 1x LONG ( see link below )
Ultra ProShares :- (+2x)were the first ETFs to double (2x) the daily performance of their tracking indices or benchmarks
Short ProShares :- (-1x) were the first ETFs designed to go up when the benchmarks go down and vice versa.
UltraShort ProShares :- (-2x) which provides twice the return [or loss] from the movement in the index, in a reverse fashion.
--------------------
-----------------------
This blog has all kinds of ETF
simple ETF, double ETF, triple ETF , Short ETF, Double short ETF, trile short ETF ( see on right side categories )
SPY : What the Euro can do to the S&P 500 ? : this is good obeservation, so based on this if EURO drops in this 3 rd time region C , then S&P follows the drop in the following weeks. If that happens both EURO and S&P falling 'Crude OIL' takes bit hit . let us see
-----
see other other blogs on the right side 'afraid to trade', 'alpha global investor' etc..
The Definitive Oil ETF Guide: List of Oil ETFs and More
asr: see other blog of hardassertsinvesting about 3-1-1 , 2-1-1 OIL cracks with ETF .. 'gosoline' ETF UGA , heating oil ETF UHN are easy way to do it this cracks as seasonal from SEPT to MARCH and then reverse.
Ticker ETF Underlying Commodity
UNG United States Natural Gas Fund Natural Gas
USO United States Oil Fund West Texas Intermediate Crude Oil
UGA United States Gasoline Fund Gasoline
DBO PowerShares DB Oil Fund West Texas Intermediate Crude Oil
UHN United States Heating Oil Fund Heating Oil
-----
ETF big list
ETF Trends: Dollar, Commodities Continue See-Saw Game
note: this has all the sectors etc..
Commodity ETFs-------------
Why Everything You’ve Heard About Leveraged ETFs Is Wrong
by Michael Johnston on August 4, 2009 | Tagged as: RSU • RSW • SDS • TZA
http://etfdb.com/2009/why-everything-youve-heard-about-leveraged-etfs-is-wrong/
Below are daily volumes (in millions of shares) for two of the most popular leveraged ETFs Direxion TZA , ProShares SDS
http://www.direxionshares.com/etfs
http://www.proshares.com/funds?products=&fundType=
About: Launched in 2006, ProShares, which is part of ProFunds Group, is the world's largest manager of short and leveraged funds.
ProShares UltraShort and UltraLong ETF
ProShares ETF List
UltraShort ProShares ETFs: 24 Ways to Benefit From Going Short
Proshares :- seems there is NO offer of 1x LONG ( see link below )
Ultra ProShares :- (+2x)were the first ETFs to double (2x) the daily performance of their tracking indices or benchmarks
Short ProShares :- (-1x) were the first ETFs designed to go up when the benchmarks go down and vice versa.
UltraShort ProShares :- (-2x) which provides twice the return [or loss] from the movement in the index, in a reverse fashion.
--------------------
-----------------------
This blog has all kinds of ETF
simple ETF, double ETF, triple ETF , Short ETF, Double short ETF, trile short ETF ( see on right side categories )
SPY : What the Euro can do to the S&P 500 ? : this is good obeservation, so based on this if EURO drops in this 3 rd time region C , then S&P follows the drop in the following weeks. If that happens both EURO and S&P falling 'Crude OIL' takes bit hit . let us see
-----
see other other blogs on the right side 'afraid to trade', 'alpha global investor' etc..
United States Oil Fund USO ETF , USL , UNG
Natural gas prices spike 12 percent even with storage facilities bulging
Prices jumped more than 12 percent in value for each per 1,000 cubic feet of natural gas on the New York Mercantile Exchange to start the week.
1/ Rapidly spiking prices led to some talk on Nymex that a very large player in the market believes that, at least in the short term, prices have fallen too far.
2/ Analysts at Goldman Sachs said prices for natural gas may even triple over the winter, though most energy experts believe there is a far greater chance that prices will plunge again.
There are two big factors that support the latter view, which would mean extremely cheap heating bills for a lot of people over the next few months.
a) The first is that natural gas in storage is 17 percent greater than it was last year and it is even nearing the maximum storage capacity in some places. And the U.S Energy Information Administration said in its short-term energy outlook that it expects another 12 percent buildup through October.
b) At the same time most meteorologists predict a very mild winter for large parts of the country. With demand already way down from industrial utility customers, the U.S. has an enormous amount of unused natural gas.
Oil and natural gas have historically tracked one another as far as prices go, but this year has been a different story.
--------
Natural Gas Fund /quotes/comstock/13*!ung/quotes/nls/ung (UNG 10.72, +0.13, +1.23%) were down about 6% in active premarket trade Monday after the exchange-traded fund in a regulatory filing late Friday said it plans to resume the creation of new shares on Sept. 28.
asr: by 13:00 EST , UNG recoverd 6% loss and stood at gain of 1% for the day. so new share issue cause morning panic selling.
The natural-gas ETF has been trading at a premium to net asset value since it halted new-share creation over the summer. The ETF's management "cannot predict what impact, if any, the resumption of creation activity will have on the price of the U.S. Natural Gas Fund units on NYSE Arca," according to Friday's filing. "It is possible that the resumption of creation activity, even on a limited basis, could reduce or remove any premium over net asset value," it said. "Investors are cautioned that paying a premium over the net asset value for U.S. Natural Gas Fund units can lead to additional losses for the investor in the event that the investor sells such units at a time when the premium is no longer present in the market price."
--------
Natural Gas Has Spiked 60% Since Labor Day. Why?
Dian Profile: at this URL.
ASR: we can ask advice of Dain ( as paid service ) on 'NG' future LONG/'UNG' short on friday after they UNG ETF announced they issue more new shares.
http://seekingalpha.com/author/dian-l-chu
--------------
ETF Spotlight: United States Oil Fund (USO)
Assets: $2.8 billion
Objective
USO seeks to reflect the performance of West Texas Intermediate light, sweet crude oil. It invests in futures contracts.
How It Works
USO holds long positions on oil futures, rolling them forward each month. Three factors impact the ETF:
1. Changes in the spot price
2. Interest income on uninvested cash
3. The roll yield
USO’s prospectus warns of such a situation: a negative “roll yield” could cause the net asset value of USO to deviate significantly from crude’s spot price.
------------
asr note: as last post said USL is up 27% vs USO only 9% , oil DB 30% in this article . It seems for long term investor USL seems better .
Why Trading Oil With ETFs Is Better and Easier
------------
about a few ETFs that I was considering for the PeakStocks.com portfolio both long and short.
My advice is to play oil utilizing the USL vs. the USO unless you are a seasoned trader that has specific reasons for trading the USO such as the price movements associated with the rollover on or around the 4 day period of the 6th of each month.
One of those names was the United States Oil Fund (NYSE: USO), one of the largest ETFs in existence, and because it is so large, this ETF represents 1/5th of the total trading volume on the U.S. Nymex Exchange for oil futures contracts.
In the course of researching this ETF for possible purchase, or shorting, I came across some disturbing bits of information regarding how the ETF trades, and its overall affect on the oil markets.
In fact, on Friday February 27th, the Commodity Futures Trading Commission (CFTC), opened an investigation into the USO, as well as other market participants, regarding the Feb. 6 “roll”, or sale of the expiring front-month oil contract and purchase of the successive month’s contract.
New to the USO story?
The USO is an Exchange Traded Fund (ETF) that seeks to reflect the performance, less expenses, of the spot price of West Texas Intermediate (WTI) light, sweet crude oil.
The fund invests in futures contracts for WTI light, sweet crude oil, other types of crude oil, heating oil, gasoline, natural gas and other petroleum based-fuels that are traded on exchanges.
It may also invest in other oil interests such as cash-settled options on oil futures contracts, forward contracts for oil, and OTC transactions that are based on the price of oil.
In a nutshell, all things considered, the USO is a proxy for the price of oil, aside from its dependence on “rolling” the price of it’s contracts into future months, which can adversely affect its actual ability to “track” the price of oil.
Is the USO a Piece of Junk?
First a little background
As mentioned above, the USO was created as a proxy to track the price of oil.
When the fund was first created, its price was exactly 1-1 that of the current future’s month oil price.
That however has changed dramatically.
You see, the USO is a rolling ETF, which means in essence that every 30 days or so, the ETF has to “roll” into the forward contracts of oil BEFORE the ones it is holding expires.
There are other funds like the USL (NYSE: USL), which hold 12 month’s worth of contracts instead of just one so they merely roll one month but still hold the other 11, reducing price volatility and keep the fund more closely tied to the actual price of oil.
So, for the USO, if the ETF held say March contracts in the month of February, then at a specified period of time (for the USO it’s around the 6th of the month, but now over a 4 day period around that same time), the fund “rolls over” into the next month ahead of the one it carries.
In this example, say that it owned March futures contracts for oil at $40.
Then at or around the rollover date, the fund would have to sell all of it’s $40 contracts for March, and roll them over to April contracts that cost for example, $45. This part is pretty straightforward.
Here’s the problem with the USO: Rolling the current month’s contracts into the next month’s contracts, especially lately, creates what is called contango when the future price is higher than the current price.
Contango basically means that the price of the future contract is higher than the current contract, and thus, when the fund has to roll over into the next month’s contract, it has to pony up more money to do so, thus costing investors valuable gains, and actually LAGGING the performance of the underlying commodity it is trying to mimic.
Some of these losses are mitigated because the USO earns interest on the money it collects from investors, and because it only needs 10% of those funds to actually secure the futures contracts because of leverage.
By the way, the exact opposite can occur as well in what is known as backwardation.
In this case, the future contract costs LESS than the previous month’s contract, and thus the fund actually earns a higher rate of return than the fund it is tracking because of that.
Just to let you know however, since the inception of the USO, the fund has been in contango way more often than it has been in backwardation, thus costing investors more than they have gained as a result of the contract’s rolling over.
OK, so what?
Here’s the crux of the problem: because the USO has been in contango way more than it has been in backwardation, and by a much higher relative margin, what once started as a 1-1 ratio fund mimicking the price of oil, is now LAGGING the actual returns that you would have made with investing in oil and is now at about a .68 ratio.
This means that if you had invested $10,000 in the USO at its inception, that initial investment would now be worth about $7,000 NOT even accounting for any price movement in oil! This is just as a result of your loss of capital because of the way the fund is structured whereby it continuously rolls into future months of oil, losing a little on each trade.
Think of this as akin to currency erosion that is taking place right now around the world, whereby if you were invested in stocks in other markets, say in England, the loss of the British Pound to the U.S. dollar (about 30% in the last 6 months or so) would mean that even if your investments broke even, you would essentially still be DOWN 30% because of the erosion in the value of the underlying currency with which you purchased shares in those investments.
Before I started really looking into the USO, I never knew about this as an issue, and now that I have fully developed my thesis and investigated further I see that this is no way to play oil, aside from other problems that the fund is having, as I’ll go into more below.
More Bad News: CFTC Investigates USO and Other Funds
Large fund now able to move markets
To add to the contango scenario mentioned above, there is another worry with the USO that most people don’t even realize: the fund is so absolutely huge, accounting for 1/5th or more of the total Nymex contracts, that when the fund rolls over, that in and of itself moves the price of oil!
The price action lately is usually to move the expiring contract price downward as the fund sells those contracts, and upward for the new contracts that the fund is now purchasing, thus further eroding investors' gains and accelerating their losses!
As a result of the price movement and volatility, the USO has now changed its procedures to unload and buy these contracts over a 4 day period of time, rather than the usual 1 day.
In addition, on Friday February 27th, The Commodity Futures Trading Commission (CFTC) said its enforcement staff is investigating the United States Oil Fund LP and other market participants regarding the Feb. 6 “roll”, or sale of the expiring front-month oil contract and purchase of the successive month’s contract.
On Feb. 6, March oil futures, the front-month contract at the time, lost more than 2% in trading on the New York Mercantile Exchange as USO rolled its holdings into the April oil contract.
Prices in the March contract slid below $40 a barrel in the next trading session for the first time in three weeks.
Some investors believed the selling of USO, which held about 20% of all March contracts, contributed to the price downturn.
Now while I don’t foresee any real damage or changes coming out of this “probe”, it does illustrate just one more problem with the fund in that it is so large, that it now can move markets by itself, and not only that, but by the very nature of that knowledge, move markets as others hop on board and try and piggyback the gains/losses and rollovers that the fund is trying to accomplish thus adding to the overall volatility in the oil market.
So, IS the USO a Piece of Junk?
Yep, I think it is…here’s why:
* Contango too much to overcome: The very fact that the USO rolls over its contracts every single month creates a lot of extra price erosion in the underlying value of the fund.
Because we’ve been in, and will continue to be in, contango for a long period of time as oil prices are expected to rise, and future contracts are being held hostage for much higher prices, our investment in this fund would continue to be eroded over time, and buying and holding would in essence lose us money even if the price of oil stayed constant.
Sure, we could experience an extended period of backwardation, or the opposite of contango, and make money as the contracts are rolled over above and beyond the price of oil, but here’s the thing: if the future contracts are selling for LESS than the current contracts, doesn’t that mean that the price of oil is declining, and therefore, no matter what amount we are making on these contract swaps, we are still losing money on the underlying investment as oil prices decline?
Again, I don’t like having to overcome an extra handicap when trying to beat the overall market’s returns.
* No pricing advantage: As a result of the fund’s size and timed roll over dates, we are completely losing our advantage over Wall Street and other traders in “knowing” or taking advantage of something that not too many know about, and thus exercising our key differentiators as individual investors.
That has been completely removed as a result of the USO’s size, roll over timing, and associated hoopla and market coverage related to oil, the fund itself, and commodity futures trading.
We’re essentially small fish being carried away by the tide and there’s nothing we can do about it.
This would be fine with a small or micro-cap investment that we’ve thoroughly researched and investigated and can simply buy and hold to wait for our investment thesis to play out, but there isn’t such an advantage with the USO.
Can I still play the USO?
Sure, for short term, week-to-week movements, it’s still a decent proxy for oil, but anything longer than that, and you start to run into the above mentioned problems with the rollover and the size of the fund eating into your gains, and exacerbating your losses.
For traders, right around the 6th of each month when the USO exits its old contracts and enters the new ones, there is heightened volatility as well, and therefore, something that might interested those with a day trader mentality, or for short term price swings.
Are there other ways to play oil?
Yep, the other ETF that trades on the price of oil but uses 12 months worth of contracts, is the United States 12 Month Oil Fund (NYSE: USL).
This fund seeks to replicate the changes in percentage terms of the price of light, sweet crude oil delivered to Cushing, Oklahoma, as measured by the changes in the average of the prices of 12 futures contracts on crude oil traded on the New York Mercantile Exchange.
The fund consists of the near month contract to expire and the contracts for the following eleven months, for a total of 12 consecutive month’s contracts.
When calculating the daily movement of the average price of the 12 contracts each contract month will be equally weighted.
This is a much better way to protect yourself against contango and backwardation as the risk is spread out over a 12 month period, and only the front month is rolled over thus avoiding not only large price fluctuations as a result of the total volume of contracts, but also because all 12 months are equally weighted, month to month changes in contango or backwardation won’t affect the fund as heavily.
Bottom Line
In doing further research into how I could play oil and trade this volatile but potentially lucrative commodity, I dug up some disturbing facts about the USO that lead me to believe that it is not worth our investment, and is a literal piece of junk.
I will be removing it from my watch list, and instead replacing it with the much more balanced USL ETF that trades on the next 12 months of oil prices, rather than just one month ahead.
It’s just another way of playing both sides: the changes in the price of oil both up and down, and the relative stability of all 12 future month’s contracts which smooth out the price swings and the contango and backwardation possibilities and make the investment more suitable for a buy and hold strategy since market timing for oil is nearly impossible.
My advice is to play oil utilizing the USL vs. the USO unless you are a seasoned trader that has specific reasons for trading the USO such as the price movements associated with the rollover on or around the 4 day period of the 6th of each month.
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Options: Call-Buyer in United States Oil Fund ETF
asr: story is on 7/30/09 when OIL future is at $63 ( after recovery from 58 to 67 , then back to 63 )
CHICAGO -- Crude oil took its biggest hit in three months yesterday, dropping nearly 6% to $63.26 a barrel the same day U.S. durable goods orders dropped by 2.5%. But at least one investor expressed bullishness with a tall order of calls in the United States Oil Fund ETF (USO Quote) during afternoon trading.
The investor bought 100,000 Jan. 2010 55 calls for 25 cents per contract, with the stock trading around $33.80. That means this investor needs USO shares to expire higher than $55.25 in half a year. These calls dropped three cents on the day and were home to open interest of 3,100 contracts. By the end of the day, more than 105,000 Jan. 55 calls changed hands, and USO shares closed down $2.29 to $33.47.
It's interesting that we saw heavy call-buying activity after USO stock has seen a prolonged downturn since the end of September last year -- these shares have dropped 71% since reaching a 52-week high of $117.24 last July.
While investors should not interpret bullish activity such as this as a reason to buy up USO stock, it is interesting that at least one investor bought calls in this fund on a down-market day.
Jud Pyle is the chief investment strategist for Options News Network and the portfolio manager of TheStreet.com Options Alerts. Click here for a free trial for Options Alerts. Mr. Pyle writes regularly about options investing for TheStreet.com.
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Proshares ETF
all proshares
http://www.proshares.com/funds/performance/8879676.html
http://www.proshares.com/funds/performance/PerformancePricingFAQs.html
http://www.proshares.com/CommodityCurrencyProSharesTaxationFAQs.html
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Ultimate Guide to Natural Gas Futures, Part 1
UNG uses a monthly roll strategy whereby it buys the near month contract and then rolls to the next contract before expiration. Investors can go to the Web site of the United States Natural Gas fund and find the roll dates under the "Fund Facts."
GAZ is a note that tracks the Dow Jones-UBS Natural Gas Total Return Sub Index. It uses a similar strategy to UNG, but instead of rolling monthly, it rolls bi-monthly. Since GAZ is an ETN, it doesn't list what contracts it owns, if any. Barclays stands behind the notes and is responsible to make payments on the contracts, and a purchaser of GAZ is lending Barclays money the same as other bond holders. Barclays is not restricted in how it can use the capital and investors face the same risk as other holders of Barclays debt.
One important difference between UNG and GAZ, besides the credit risk in GAZ, is the tax implications. UNG is a partnership that pays no Federal taxes itself. Gains or losses are passed through to shareholders. Investors receive a Schedule K-1 and may have tax credits or liabilities even if they receive no income payments. GAZ is similar to other stocks in that income payments would be reported on a Form 1099 and capital gains and losses are incurred at the sale. Neither UNG nor GAZ has paid dividends.
A major issue that erupted in summer 2009 was the popularity of UNG and concerns over new CFTC regulations on position size. First, UNG was forced to purchase swaps because it became a huge portion of the market for near month gas futures contracts. Swaps carry counterparty risk, however, which causes it to have similar credit risk to GAZ, albeit less transparent. Concerned that the CTFC may limit how many contracts they can own, both UNG and GAZ stopped issuing new shares. This led to a premium in both funds.
The premium fluctuates daily. As of this writing they are similar, about 10%, but UNG has traded at a higher premium at times, briefly reaching a peak of 20% at one point. If the funds begin issuing shares again, the premium will disappear almost instantly.
You can check the premiums during trading on Yahoo! Finance by finding the intraday indicative value of the fund. Enter ^UNG-IV or ^GAZ-IV as the symbol and compare it to the last price; it is updated throughout the day. (You can substitute any ETF or ETN symbol to get its intraday indicative value.)
Contango
Another issue to consider is extreme contango. Futures contracts can be in contango or backwardation. Contango refers to the situation when near-month contracts are cheaper than contracts farther out in time. Backwardation is the opposite, when near-month contracts are more expensive.
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Since futures contracts have an expiration date, it is impossible to buy and hold. Commodity trading strategies take this into consideration and determine which contracts promise the best return. In the case of UNG and GAZ, the funds use a simple strategy that exposes them to gains or losses, depending on where there is backwardation or contango.
For instance, say natural gas for October delivery costs $2 and natural gas for November delivery costs $4. If a trader holds 1,000 contracts at $2 and rolls monthly, he will only hold 500 contracts after the roll, assuming no transaction costs. This became a major issue with UNG because it grew to such a large size.
When UNG rolls, its selling and buying cause the contango to widen, and since it publicly announces its roll dates, other traders can profit from UNG's "largesse." UNG shareholders suffered losses as they sold at lower prices and bought at higher prices. Currently, contango is especially large, due to several factors, which I have written about previously, and this makes this situation even worse.
Prices jumped more than 12 percent in value for each per 1,000 cubic feet of natural gas on the New York Mercantile Exchange to start the week.
1/ Rapidly spiking prices led to some talk on Nymex that a very large player in the market believes that, at least in the short term, prices have fallen too far.
2/ Analysts at Goldman Sachs said prices for natural gas may even triple over the winter, though most energy experts believe there is a far greater chance that prices will plunge again.
There are two big factors that support the latter view, which would mean extremely cheap heating bills for a lot of people over the next few months.
a) The first is that natural gas in storage is 17 percent greater than it was last year and it is even nearing the maximum storage capacity in some places. And the U.S Energy Information Administration said in its short-term energy outlook that it expects another 12 percent buildup through October.
b) At the same time most meteorologists predict a very mild winter for large parts of the country. With demand already way down from industrial utility customers, the U.S. has an enormous amount of unused natural gas.
Oil and natural gas have historically tracked one another as far as prices go, but this year has been a different story.
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Natural Gas Fund /quotes/comstock/13*!ung/quotes/nls/ung (UNG 10.72, +0.13, +1.23%) were down about 6% in active premarket trade Monday after the exchange-traded fund in a regulatory filing late Friday said it plans to resume the creation of new shares on Sept. 28.
asr: by 13:00 EST , UNG recoverd 6% loss and stood at gain of 1% for the day. so new share issue cause morning panic selling.
The natural-gas ETF has been trading at a premium to net asset value since it halted new-share creation over the summer. The ETF's management "cannot predict what impact, if any, the resumption of creation activity will have on the price of the U.S. Natural Gas Fund units on NYSE Arca," according to Friday's filing. "It is possible that the resumption of creation activity, even on a limited basis, could reduce or remove any premium over net asset value," it said. "Investors are cautioned that paying a premium over the net asset value for U.S. Natural Gas Fund units can lead to additional losses for the investor in the event that the investor sells such units at a time when the premium is no longer present in the market price."
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Natural Gas Has Spiked 60% Since Labor Day. Why?
Dian Profile: at this URL.
ASR: we can ask advice of Dain ( as paid service ) on 'NG' future LONG/'UNG' short on friday after they UNG ETF announced they issue more new shares.
http://seekingalpha.com/author/dian-l-chu
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ETF Spotlight: United States Oil Fund (USO)
Assets: $2.8 billion
Objective
USO seeks to reflect the performance of West Texas Intermediate light, sweet crude oil. It invests in futures contracts.
How It Works
USO holds long positions on oil futures, rolling them forward each month. Three factors impact the ETF:
1. Changes in the spot price
2. Interest income on uninvested cash
3. The roll yield
USO’s prospectus warns of such a situation: a negative “roll yield” could cause the net asset value of USO to deviate significantly from crude’s spot price.
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asr note: as last post said USL is up 27% vs USO only 9% , oil DB 30% in this article . It seems for long term investor USL seems better .
Why Trading Oil With ETFs Is Better and Easier
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about a few ETFs that I was considering for the PeakStocks.com portfolio both long and short.
My advice is to play oil utilizing the USL vs. the USO unless you are a seasoned trader that has specific reasons for trading the USO such as the price movements associated with the rollover on or around the 4 day period of the 6th of each month.
One of those names was the United States Oil Fund (NYSE: USO), one of the largest ETFs in existence, and because it is so large, this ETF represents 1/5th of the total trading volume on the U.S. Nymex Exchange for oil futures contracts.
In the course of researching this ETF for possible purchase, or shorting, I came across some disturbing bits of information regarding how the ETF trades, and its overall affect on the oil markets.
In fact, on Friday February 27th, the Commodity Futures Trading Commission (CFTC), opened an investigation into the USO, as well as other market participants, regarding the Feb. 6 “roll”, or sale of the expiring front-month oil contract and purchase of the successive month’s contract.
New to the USO story?
The USO is an Exchange Traded Fund (ETF) that seeks to reflect the performance, less expenses, of the spot price of West Texas Intermediate (WTI) light, sweet crude oil.
The fund invests in futures contracts for WTI light, sweet crude oil, other types of crude oil, heating oil, gasoline, natural gas and other petroleum based-fuels that are traded on exchanges.
It may also invest in other oil interests such as cash-settled options on oil futures contracts, forward contracts for oil, and OTC transactions that are based on the price of oil.
In a nutshell, all things considered, the USO is a proxy for the price of oil, aside from its dependence on “rolling” the price of it’s contracts into future months, which can adversely affect its actual ability to “track” the price of oil.
Is the USO a Piece of Junk?
First a little background
As mentioned above, the USO was created as a proxy to track the price of oil.
When the fund was first created, its price was exactly 1-1 that of the current future’s month oil price.
That however has changed dramatically.
You see, the USO is a rolling ETF, which means in essence that every 30 days or so, the ETF has to “roll” into the forward contracts of oil BEFORE the ones it is holding expires.
There are other funds like the USL (NYSE: USL), which hold 12 month’s worth of contracts instead of just one so they merely roll one month but still hold the other 11, reducing price volatility and keep the fund more closely tied to the actual price of oil.
So, for the USO, if the ETF held say March contracts in the month of February, then at a specified period of time (for the USO it’s around the 6th of the month, but now over a 4 day period around that same time), the fund “rolls over” into the next month ahead of the one it carries.
In this example, say that it owned March futures contracts for oil at $40.
Then at or around the rollover date, the fund would have to sell all of it’s $40 contracts for March, and roll them over to April contracts that cost for example, $45. This part is pretty straightforward.
Here’s the problem with the USO: Rolling the current month’s contracts into the next month’s contracts, especially lately, creates what is called contango when the future price is higher than the current price.
Contango basically means that the price of the future contract is higher than the current contract, and thus, when the fund has to roll over into the next month’s contract, it has to pony up more money to do so, thus costing investors valuable gains, and actually LAGGING the performance of the underlying commodity it is trying to mimic.
Some of these losses are mitigated because the USO earns interest on the money it collects from investors, and because it only needs 10% of those funds to actually secure the futures contracts because of leverage.
By the way, the exact opposite can occur as well in what is known as backwardation.
In this case, the future contract costs LESS than the previous month’s contract, and thus the fund actually earns a higher rate of return than the fund it is tracking because of that.
Just to let you know however, since the inception of the USO, the fund has been in contango way more often than it has been in backwardation, thus costing investors more than they have gained as a result of the contract’s rolling over.
OK, so what?
Here’s the crux of the problem: because the USO has been in contango way more than it has been in backwardation, and by a much higher relative margin, what once started as a 1-1 ratio fund mimicking the price of oil, is now LAGGING the actual returns that you would have made with investing in oil and is now at about a .68 ratio.
This means that if you had invested $10,000 in the USO at its inception, that initial investment would now be worth about $7,000 NOT even accounting for any price movement in oil! This is just as a result of your loss of capital because of the way the fund is structured whereby it continuously rolls into future months of oil, losing a little on each trade.
Think of this as akin to currency erosion that is taking place right now around the world, whereby if you were invested in stocks in other markets, say in England, the loss of the British Pound to the U.S. dollar (about 30% in the last 6 months or so) would mean that even if your investments broke even, you would essentially still be DOWN 30% because of the erosion in the value of the underlying currency with which you purchased shares in those investments.
Before I started really looking into the USO, I never knew about this as an issue, and now that I have fully developed my thesis and investigated further I see that this is no way to play oil, aside from other problems that the fund is having, as I’ll go into more below.
More Bad News: CFTC Investigates USO and Other Funds
Large fund now able to move markets
To add to the contango scenario mentioned above, there is another worry with the USO that most people don’t even realize: the fund is so absolutely huge, accounting for 1/5th or more of the total Nymex contracts, that when the fund rolls over, that in and of itself moves the price of oil!
The price action lately is usually to move the expiring contract price downward as the fund sells those contracts, and upward for the new contracts that the fund is now purchasing, thus further eroding investors' gains and accelerating their losses!
As a result of the price movement and volatility, the USO has now changed its procedures to unload and buy these contracts over a 4 day period of time, rather than the usual 1 day.
In addition, on Friday February 27th, The Commodity Futures Trading Commission (CFTC) said its enforcement staff is investigating the United States Oil Fund LP and other market participants regarding the Feb. 6 “roll”, or sale of the expiring front-month oil contract and purchase of the successive month’s contract.
On Feb. 6, March oil futures, the front-month contract at the time, lost more than 2% in trading on the New York Mercantile Exchange as USO rolled its holdings into the April oil contract.
Prices in the March contract slid below $40 a barrel in the next trading session for the first time in three weeks.
Some investors believed the selling of USO, which held about 20% of all March contracts, contributed to the price downturn.
Now while I don’t foresee any real damage or changes coming out of this “probe”, it does illustrate just one more problem with the fund in that it is so large, that it now can move markets by itself, and not only that, but by the very nature of that knowledge, move markets as others hop on board and try and piggyback the gains/losses and rollovers that the fund is trying to accomplish thus adding to the overall volatility in the oil market.
So, IS the USO a Piece of Junk?
Yep, I think it is…here’s why:
* Contango too much to overcome: The very fact that the USO rolls over its contracts every single month creates a lot of extra price erosion in the underlying value of the fund.
Because we’ve been in, and will continue to be in, contango for a long period of time as oil prices are expected to rise, and future contracts are being held hostage for much higher prices, our investment in this fund would continue to be eroded over time, and buying and holding would in essence lose us money even if the price of oil stayed constant.
Sure, we could experience an extended period of backwardation, or the opposite of contango, and make money as the contracts are rolled over above and beyond the price of oil, but here’s the thing: if the future contracts are selling for LESS than the current contracts, doesn’t that mean that the price of oil is declining, and therefore, no matter what amount we are making on these contract swaps, we are still losing money on the underlying investment as oil prices decline?
Again, I don’t like having to overcome an extra handicap when trying to beat the overall market’s returns.
* No pricing advantage: As a result of the fund’s size and timed roll over dates, we are completely losing our advantage over Wall Street and other traders in “knowing” or taking advantage of something that not too many know about, and thus exercising our key differentiators as individual investors.
That has been completely removed as a result of the USO’s size, roll over timing, and associated hoopla and market coverage related to oil, the fund itself, and commodity futures trading.
We’re essentially small fish being carried away by the tide and there’s nothing we can do about it.
This would be fine with a small or micro-cap investment that we’ve thoroughly researched and investigated and can simply buy and hold to wait for our investment thesis to play out, but there isn’t such an advantage with the USO.
Can I still play the USO?
Sure, for short term, week-to-week movements, it’s still a decent proxy for oil, but anything longer than that, and you start to run into the above mentioned problems with the rollover and the size of the fund eating into your gains, and exacerbating your losses.
For traders, right around the 6th of each month when the USO exits its old contracts and enters the new ones, there is heightened volatility as well, and therefore, something that might interested those with a day trader mentality, or for short term price swings.
Are there other ways to play oil?
Yep, the other ETF that trades on the price of oil but uses 12 months worth of contracts, is the United States 12 Month Oil Fund (NYSE: USL).
This fund seeks to replicate the changes in percentage terms of the price of light, sweet crude oil delivered to Cushing, Oklahoma, as measured by the changes in the average of the prices of 12 futures contracts on crude oil traded on the New York Mercantile Exchange.
The fund consists of the near month contract to expire and the contracts for the following eleven months, for a total of 12 consecutive month’s contracts.
When calculating the daily movement of the average price of the 12 contracts each contract month will be equally weighted.
This is a much better way to protect yourself against contango and backwardation as the risk is spread out over a 12 month period, and only the front month is rolled over thus avoiding not only large price fluctuations as a result of the total volume of contracts, but also because all 12 months are equally weighted, month to month changes in contango or backwardation won’t affect the fund as heavily.
Bottom Line
In doing further research into how I could play oil and trade this volatile but potentially lucrative commodity, I dug up some disturbing facts about the USO that lead me to believe that it is not worth our investment, and is a literal piece of junk.
I will be removing it from my watch list, and instead replacing it with the much more balanced USL ETF that trades on the next 12 months of oil prices, rather than just one month ahead.
It’s just another way of playing both sides: the changes in the price of oil both up and down, and the relative stability of all 12 future month’s contracts which smooth out the price swings and the contango and backwardation possibilities and make the investment more suitable for a buy and hold strategy since market timing for oil is nearly impossible.
My advice is to play oil utilizing the USL vs. the USO unless you are a seasoned trader that has specific reasons for trading the USO such as the price movements associated with the rollover on or around the 4 day period of the 6th of each month.
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Options: Call-Buyer in United States Oil Fund ETF
asr: story is on 7/30/09 when OIL future is at $63 ( after recovery from 58 to 67 , then back to 63 )
CHICAGO -- Crude oil took its biggest hit in three months yesterday, dropping nearly 6% to $63.26 a barrel the same day U.S. durable goods orders dropped by 2.5%. But at least one investor expressed bullishness with a tall order of calls in the United States Oil Fund ETF (USO Quote) during afternoon trading.
The investor bought 100,000 Jan. 2010 55 calls for 25 cents per contract, with the stock trading around $33.80. That means this investor needs USO shares to expire higher than $55.25 in half a year. These calls dropped three cents on the day and were home to open interest of 3,100 contracts. By the end of the day, more than 105,000 Jan. 55 calls changed hands, and USO shares closed down $2.29 to $33.47.
It's interesting that we saw heavy call-buying activity after USO stock has seen a prolonged downturn since the end of September last year -- these shares have dropped 71% since reaching a 52-week high of $117.24 last July.
While investors should not interpret bullish activity such as this as a reason to buy up USO stock, it is interesting that at least one investor bought calls in this fund on a down-market day.
Jud Pyle is the chief investment strategist for Options News Network and the portfolio manager of TheStreet.com Options Alerts. Click here for a free trial for Options Alerts. Mr. Pyle writes regularly about options investing for TheStreet.com.
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Proshares ETF
all proshares
http://www.proshares.com/funds/performance/8879676.html
http://www.proshares.com/funds/performance/PerformancePricingFAQs.html
http://www.proshares.com/CommodityCurrencyProSharesTaxationFAQs.html
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Ultimate Guide to Natural Gas Futures, Part 1
UNG uses a monthly roll strategy whereby it buys the near month contract and then rolls to the next contract before expiration. Investors can go to the Web site of the United States Natural Gas fund and find the roll dates under the "Fund Facts."
GAZ is a note that tracks the Dow Jones-UBS Natural Gas Total Return Sub Index. It uses a similar strategy to UNG, but instead of rolling monthly, it rolls bi-monthly. Since GAZ is an ETN, it doesn't list what contracts it owns, if any. Barclays stands behind the notes and is responsible to make payments on the contracts, and a purchaser of GAZ is lending Barclays money the same as other bond holders. Barclays is not restricted in how it can use the capital and investors face the same risk as other holders of Barclays debt.
One important difference between UNG and GAZ, besides the credit risk in GAZ, is the tax implications. UNG is a partnership that pays no Federal taxes itself. Gains or losses are passed through to shareholders. Investors receive a Schedule K-1 and may have tax credits or liabilities even if they receive no income payments. GAZ is similar to other stocks in that income payments would be reported on a Form 1099 and capital gains and losses are incurred at the sale. Neither UNG nor GAZ has paid dividends.
A major issue that erupted in summer 2009 was the popularity of UNG and concerns over new CFTC regulations on position size. First, UNG was forced to purchase swaps because it became a huge portion of the market for near month gas futures contracts. Swaps carry counterparty risk, however, which causes it to have similar credit risk to GAZ, albeit less transparent. Concerned that the CTFC may limit how many contracts they can own, both UNG and GAZ stopped issuing new shares. This led to a premium in both funds.
The premium fluctuates daily. As of this writing they are similar, about 10%, but UNG has traded at a higher premium at times, briefly reaching a peak of 20% at one point. If the funds begin issuing shares again, the premium will disappear almost instantly.
You can check the premiums during trading on Yahoo! Finance by finding the intraday indicative value of the fund. Enter ^UNG-IV or ^GAZ-IV as the symbol and compare it to the last price; it is updated throughout the day. (You can substitute any ETF or ETN symbol to get its intraday indicative value.)
Contango
Another issue to consider is extreme contango. Futures contracts can be in contango or backwardation. Contango refers to the situation when near-month contracts are cheaper than contracts farther out in time. Backwardation is the opposite, when near-month contracts are more expensive.
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Since futures contracts have an expiration date, it is impossible to buy and hold. Commodity trading strategies take this into consideration and determine which contracts promise the best return. In the case of UNG and GAZ, the funds use a simple strategy that exposes them to gains or losses, depending on where there is backwardation or contango.
For instance, say natural gas for October delivery costs $2 and natural gas for November delivery costs $4. If a trader holds 1,000 contracts at $2 and rolls monthly, he will only hold 500 contracts after the roll, assuming no transaction costs. This became a major issue with UNG because it grew to such a large size.
When UNG rolls, its selling and buying cause the contango to widen, and since it publicly announces its roll dates, other traders can profit from UNG's "largesse." UNG shareholders suffered losses as they sold at lower prices and bought at higher prices. Currently, contango is especially large, due to several factors, which I have written about previously, and this makes this situation even worse.
means that speculators controlled 48% of the open interest in NYMEX crude oil futures and options as of July 15
http://www.elitetrader.com/vb/showthread.php?s=&postid=2539973#post2539973
The above CFTC story is dated August 5, 2008 ( Reutrers story ) , notice it is one year OLD story NOT AUG 2009
same CFTC story is posted at this link in AUG 2008 , so it is not a typo error , it is one year OLD story
https://bbs.stardestroyer.net/viewt...7&view=previous
It may be one year old story, but this big speculators who are used to milking small investors habits do not change much . their practice is same today as it is one year ago.
but bottom line is NYMEX oil future contracts are heavily manipulated by big speculators milking small investors by forcing to close their margin call positions and once small investors close their positions with heavy losses then big speculators turn crude futures price in the reverse direction . This is the main reason for big swings in crude market
--------------
asr note: this is Reuters AUG 5 story
Revised data show speculators controlled nearly half of NYMEX oil futures
CFTC data also reveals one trader controlled 10% of oil futures on exchange
http://www.elitetrader.com/vb/showthread.php?s=&threadid=172061
August 5, 2008
(Reuters)—A quiet data revision that has boosted by nearly 25% the number of oil futures contracts U.S. regulators think are held by speculators. And that revelation is raising eyebrows in the energy trading community.
The revision means that speculators controlled 48% of the open interest in NYMEX crude oil futures and options as of July 15—compared with just over 38% under the previous classification.
“That’s huge when you look at the numbers,” said Phil Flynn of Alaron Trading in Chicago.
“It changes the whole way you look at the recent moves in this market.”
The U.S. Commodities Futures Trading Commission announced on July 18 that it was reclassifying some trading positions that it had reported as commercial hedging positions as noncommercial speculative positions.
The data revision converted approximately 327,000 long and 330,000 short NYMEX crude oil futures and options positions into mostly spreading positions held by speculators.
The big shift is all the more surprising, oil traders and analysts said, since the CFTC reclassified only one unidentified oil trader at the same time as the data revision.
“There may have been multiple ‘positions’ which were reclassified ... but they all appear to have been held by just one trader, and this was a very special trader, with an enormous concentration of positions in crude oil amounting to perhaps 460 million barrels, and not much interest in anything else,” noted John Kemp of RBS Sempra Commodities.
A CFTC spokeswoman declined to elaborate on the move or to identify the trader that had been reclassified as a speculator.
The reclassification comes amid the collapse of energy trader SemGroup LP, which filed for bankruptcy on July 22 after suffering $3.2 billion in losses on oil futures and derivatives.
SemGroup has blamed its collapse on unauthorized speculative oil trading by its co-founder and former chief executive, according to a court filing by a SemGroup lender.
The SemGroup collapse coincided with a sharp fall in oil futures from their peak over $147 a barrel in mid-July. However a person familiar with SemGroup’s trading position said Monday the trader’s position was not concentrated in any one month and was more focused on intermonth spread positions.
“This was no Amaranth or Motherrock,” said the person familiar with SemGroup’s futures trading book, referring to two energy hedge funds whose multibillion dollar failures roiled futures markets.
SemGroup began the process of transferring its NYMEX trading book to Barclays on July 11 after drawing down a $54 million line of credit to place a deposit with the British bank, according to bankruptcy court testimony.
SemGroup completed the transfer of its trading book to Barclays on July 16.
The transfer of SemGroup’s NYMEX trading position was instigated by the exchange itself, according to a source familiar with the NYMEX’s activities.
SemGroup’s financial difficulties were first disclosed by its publicly traded subsidiary SemGroup Energy Partners LP on July 17, three days after its parent hired The Blackstone Groupto advise it on restructuring and two days after a conference call with its lenders where it told them it had run out of cash.
The Securities and Exchange Commission and the U.S. Justice Department are investigating SemGroup Energy Partners’ disclosure practices.
-------------------
asr : the link below states same story , the post is dated as AUG 2008 not 2009 , so it seems the story is of 2008 AUG which is one year OLD ...
https://bbs.stardestroyer.net/viewtopic.php?f=22&t=125417&view=previous
The above CFTC story is dated August 5, 2008 ( Reutrers story ) , notice it is one year OLD story NOT AUG 2009
same CFTC story is posted at this link in AUG 2008 , so it is not a typo error , it is one year OLD story
https://bbs.stardestroyer.net/viewt...7&view=previous
It may be one year old story, but this big speculators who are used to milking small investors habits do not change much . their practice is same today as it is one year ago.
but bottom line is NYMEX oil future contracts are heavily manipulated by big speculators milking small investors by forcing to close their margin call positions and once small investors close their positions with heavy losses then big speculators turn crude futures price in the reverse direction . This is the main reason for big swings in crude market
--------------
asr note: this is Reuters AUG 5 story
Revised data show speculators controlled nearly half of NYMEX oil futures
CFTC data also reveals one trader controlled 10% of oil futures on exchange
http://www.elitetrader.com/vb/showthread.php?s=&threadid=172061
August 5, 2008
(Reuters)—A quiet data revision that has boosted by nearly 25% the number of oil futures contracts U.S. regulators think are held by speculators. And that revelation is raising eyebrows in the energy trading community.
The revision means that speculators controlled 48% of the open interest in NYMEX crude oil futures and options as of July 15—compared with just over 38% under the previous classification.
“That’s huge when you look at the numbers,” said Phil Flynn of Alaron Trading in Chicago.
“It changes the whole way you look at the recent moves in this market.”
The U.S. Commodities Futures Trading Commission announced on July 18 that it was reclassifying some trading positions that it had reported as commercial hedging positions as noncommercial speculative positions.
The data revision converted approximately 327,000 long and 330,000 short NYMEX crude oil futures and options positions into mostly spreading positions held by speculators.
The big shift is all the more surprising, oil traders and analysts said, since the CFTC reclassified only one unidentified oil trader at the same time as the data revision.
“There may have been multiple ‘positions’ which were reclassified ... but they all appear to have been held by just one trader, and this was a very special trader, with an enormous concentration of positions in crude oil amounting to perhaps 460 million barrels, and not much interest in anything else,” noted John Kemp of RBS Sempra Commodities.
A CFTC spokeswoman declined to elaborate on the move or to identify the trader that had been reclassified as a speculator.
The reclassification comes amid the collapse of energy trader SemGroup LP, which filed for bankruptcy on July 22 after suffering $3.2 billion in losses on oil futures and derivatives.
SemGroup has blamed its collapse on unauthorized speculative oil trading by its co-founder and former chief executive, according to a court filing by a SemGroup lender.
The SemGroup collapse coincided with a sharp fall in oil futures from their peak over $147 a barrel in mid-July. However a person familiar with SemGroup’s trading position said Monday the trader’s position was not concentrated in any one month and was more focused on intermonth spread positions.
“This was no Amaranth or Motherrock,” said the person familiar with SemGroup’s futures trading book, referring to two energy hedge funds whose multibillion dollar failures roiled futures markets.
SemGroup began the process of transferring its NYMEX trading book to Barclays on July 11 after drawing down a $54 million line of credit to place a deposit with the British bank, according to bankruptcy court testimony.
SemGroup completed the transfer of its trading book to Barclays on July 16.
The transfer of SemGroup’s NYMEX trading position was instigated by the exchange itself, according to a source familiar with the NYMEX’s activities.
SemGroup’s financial difficulties were first disclosed by its publicly traded subsidiary SemGroup Energy Partners LP on July 17, three days after its parent hired The Blackstone Groupto advise it on restructuring and two days after a conference call with its lenders where it told them it had run out of cash.
The Securities and Exchange Commission and the U.S. Justice Department are investigating SemGroup Energy Partners’ disclosure practices.
-------------------
asr : the link below states same story , the post is dated as AUG 2008 not 2009 , so it seems the story is of 2008 AUG which is one year OLD ...
https://bbs.stardestroyer.net/viewtopic.php?f=22&t=125417&view=previous
Saturday, August 1, 2009
AJAX frame works
it seems Jquery and Ext-JS are 2 main popular ones.
Jquery is light wight
Ext JS - graphical heavy and heavy weight components , it is good when you need all those graphical else lots of people are using Jquery , see these posts.
asr: see all that user responses to the post they all say they are happy with Jquery vs. Ext-JS
- dice.com Jquery serach has 300 jobs vs. 30 jobs for Ext-js/Ext Js
Why I didn’t switch from jQuery to ExtJS after all
Purpose
Most of what I use jQuery for is DOM manipulation, and occasionally a few effects. ExtJS is simply overkill. I do not need to use widgets for most clients or projects, so I do not. Instead, the lightweight jQuery lets me dart in, make a few DOM modifications, add a fade or two, and be done with it.
For example, the ExtJS grid is huge and powerful. I admire it. I just don’t need it. Nor do I want to wade through long tutorials to even begin to use it properly, even if I did have a need. In fact, I can’t think of a single client I’ve ever had who had a requirement which would have been a proper fit for that huge/powerful/gorgeous grid.
License
I do not wish to pay for my javascript framework, nor do I want to be forced to GPL it, as is the only other option available to me if I use ExtJS. I like the BSD license we use for Satchmo, and I am certain that we are not planning to change that any time soon.
-------------
Why I should use jQuery?
Simple. In just one glance at the source code of a page using jQuery you’ll see how easy it is to use, how much it accomplishes in so few lines of code, and how graceful it is.
My mind was opened one day when I stumbled across some code written with jQuery. I was flipping through the RSS feeds and reading my daily dose of web design blogs when I came across an example of JavaScript loveliness that used jQuery. Truth be told, the code on that site had some browser related bugs… but the concept was something I hadn’t seen before.
What about the code?
The code looked almost simple. Like nothing I had seen before. It made sense.
I started reading through the documentation and was amazed to see how much could be done with so little extra code.
When you can use jQuery?
You should use jQuery when you need:
* A small library that gives you powerful control over the Document Object Model
* With very little effort or work on your part
Or
* Quick access to AJAX
* Without a lot of bloat (overhead - wasted code)
* And some basic animation effects to spice things up
But…
If you need super fancy effects for animation, drag and drop, and super smooth animation then you’ll probably want to use Prototype and one of the many great library created to enhance the effects.
------------
ExtJS Implementation Spotlight: Eaton’s Intelligent Power Manager
It Seems ExtJS Ext-js is good choice for graphical intensive systems , here is one big implementation of extjs
Did you evaluate other JavaScript frameworks for the Intelligent Power Manager? Why did you choose Ext?
We compared Ext JS to many popular libraries (jQuery, Prototype, MooTools, Script.aculo.us, Dojo, Rialto, Qooxdoo, etc.). We found Ext JS to be fully open source with a strong community combined with great technical support from the authors themselves. The Ext JS cross-browser widgets set is huge, which allowed us to complete our entire interface for Intelligent Power Manager.
asr: as this lead developer told , the above may be the JS frame works popularity order
Ext JS is a very well designed, lightweight framework which integrates core JavaScript language improvements, DOM manipulation helpers, and high level widgets – saving us several months worth of development.
Thank you for your article and all these great comments :) ExtJS is an awesome solution! By the way, Eaton Intelligent Power Manager is a team work done with Jérôme Lecuivre (project manager), Luc Descotils (software architect), Arnaud Quette (Open Source project leader http://www.networkupstools.org ), Sebastien Volle (Javascript expert), Eric Clappier (SNMP expert) and all Eaton test/validation teams. Moreover, if you have any questions or need any information, you can send me a mail to jonathanbonzy [at] eaton.com ;)
Jquery is light wight
Ext JS - graphical heavy and heavy weight components , it is good when you need all those graphical else lots of people are using Jquery , see these posts.
asr: see all that user responses to the post they all say they are happy with Jquery vs. Ext-JS
- dice.com Jquery serach has 300 jobs vs. 30 jobs for Ext-js/Ext Js
Why I didn’t switch from jQuery to ExtJS after all
Purpose
Most of what I use jQuery for is DOM manipulation, and occasionally a few effects. ExtJS is simply overkill. I do not need to use widgets for most clients or projects, so I do not. Instead, the lightweight jQuery lets me dart in, make a few DOM modifications, add a fade or two, and be done with it.
For example, the ExtJS grid is huge and powerful. I admire it. I just don’t need it. Nor do I want to wade through long tutorials to even begin to use it properly, even if I did have a need. In fact, I can’t think of a single client I’ve ever had who had a requirement which would have been a proper fit for that huge/powerful/gorgeous grid.
License
I do not wish to pay for my javascript framework, nor do I want to be forced to GPL it, as is the only other option available to me if I use ExtJS. I like the BSD license we use for Satchmo, and I am certain that we are not planning to change that any time soon.
-------------
Why I should use jQuery?
Simple. In just one glance at the source code of a page using jQuery you’ll see how easy it is to use, how much it accomplishes in so few lines of code, and how graceful it is.
My mind was opened one day when I stumbled across some code written with jQuery. I was flipping through the RSS feeds and reading my daily dose of web design blogs when I came across an example of JavaScript loveliness that used jQuery. Truth be told, the code on that site had some browser related bugs… but the concept was something I hadn’t seen before.
What about the code?
The code looked almost simple. Like nothing I had seen before. It made sense.
I started reading through the documentation and was amazed to see how much could be done with so little extra code.
When you can use jQuery?
You should use jQuery when you need:
* A small library that gives you powerful control over the Document Object Model
* With very little effort or work on your part
Or
* Quick access to AJAX
* Without a lot of bloat (overhead - wasted code)
* And some basic animation effects to spice things up
But…
If you need super fancy effects for animation, drag and drop, and super smooth animation then you’ll probably want to use Prototype and one of the many great library created to enhance the effects.
------------
ExtJS Implementation Spotlight: Eaton’s Intelligent Power Manager
It Seems ExtJS Ext-js is good choice for graphical intensive systems , here is one big implementation of extjs
Did you evaluate other JavaScript frameworks for the Intelligent Power Manager? Why did you choose Ext?
We compared Ext JS to many popular libraries (jQuery, Prototype, MooTools, Script.aculo.us, Dojo, Rialto, Qooxdoo, etc.). We found Ext JS to be fully open source with a strong community combined with great technical support from the authors themselves. The Ext JS cross-browser widgets set is huge, which allowed us to complete our entire interface for Intelligent Power Manager.
asr: as this lead developer told , the above may be the JS frame works popularity order
Ext JS is a very well designed, lightweight framework which integrates core JavaScript language improvements, DOM manipulation helpers, and high level widgets – saving us several months worth of development.
Thank you for your article and all these great comments :) ExtJS is an awesome solution! By the way, Eaton Intelligent Power Manager is a team work done with Jérôme Lecuivre (project manager), Luc Descotils (software architect), Arnaud Quette (Open Source project leader http://www.networkupstools.org ), Sebastien Volle (Javascript expert), Eric Clappier (SNMP expert) and all Eaton test/validation teams. Moreover, if you have any questions or need any information, you can send me a mail to jonathanbonzy [at] eaton.com ;)
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