I was recently thinking about the rapidly increasing price of oil and then it hit me. Maybe I can buy oil at a certain rate, store it and sell it when the price of oil increases further. For example let's suppose I buy 500 barrels of oil for $50,000. Now let's say there's a 5% increase in the price of oil, now I will simply sell it and have a profit. Is this possible? Is it a good business plan? One thing that is baffling me is if it really is good, then why isn't someone else doing it already? Or is someone doing it? Let me know.
You don't even need to store it. Just buy the futures. And yes, thousands of traders are doing exactly that every single day. You need to check out the commodities market. Chicago in the major center for that in the U.S.
I can't believe the guy doesn't know that. I thought this was the 'Business' forum, shit there are some FUCKING naive people here. Jaybee.
Well, in all honesty, there is a big difference between the futures market, and buying and storing the crude oil. For one thing, and probably the most important, in the futures market, the timing is something that one specifies up front, at the initial trade. I.e., he MUST sell it at or before that particular date. If you actually bought a few oil carrier's full of crude and stored it in gallon jugs, you could hold it and sell it whenever you wished. Big difference, don't ya' see? Baron Max
Nope, not completely accurate, Max. You could buy March furtures today and if the price hasn't risen to your expectations, or has fallen by March you could take actual delivery.
futures are too risky, i don't even bother with them unless I have time and money. Pick an oil and gas company stock. Believe me they usually do well regardless. I had a couple myself.
Oh, yeah sure, ye're right, of course. But then I didn't consider that a futures buyer would want to spend the gazillion dollars necessary to build storage facilities for the oil! I mean, ye're right, any competent futures traders should already have such facilities before they even buy futures, huh. Baron Max
Right on! If you bought a thousand units (1,000 bbl/unit) of Brent crude at, say $80/unit on the futures market and by some twist of fate the price slowly declined to $60, you'd sure want to take delivery and wait rather than just loose that $20 million! Not that drastic, of course, but some traders in wheat, corn and soy have had to do that rather than take a huge hit.
Yes, they can be very risky and aren't for the faint of heart. And be serious there! NO one buys them unless they have the money (or can afford to risk a big hedge on the margin. Same thing.). Please Register or Log in to view the hidden image!
I am 14 years old, and I am more into the Computers & Technology, Real estate & Transportation (along with my dad) business so maybe that is why I don't have any basic knowledge about that topic. And I also have something which you lack, my friend. It's called good social skills along with intelligence. You may be intelligent my friend, which is good, but I would have to say that you lack good social skills, even the most basic of them. I can't believe you don't know how react properly in one of the most common of all social situations. Don't take this negatively, I don't mean to sound negative. I am trying to let you know that the effects of your bad social skills can leave you or anyone else feeling upset. If I met someone who lacked certain basic knowledge about a topic, I wouldn't go like "Oh shit! Oh shit! This is fucking unbelieveable! This guy must be very dumb. Oh what a dumb dipshit he is". I'd rather say "Well, it seems this person is unaware about this and even though it is shocking, I shouldn't discourage him and should rather help him out and encourage him to know more about this topic." Do you see the difference? The latter not only makes the person recieving your comments happy and encouraged, but it also makes you feel proud as you've just helped someone. The former would make the person recieveing those comments discouraged and angry, and it would not make you as happy as the latter one, because what you've done here is just discourage the person rather than helping him out. You've just wasted yours and his time. Let me repeat my friend, don't ever take this post in a negative way. I believe you will take it in a negative way because I believe you have a negative mind set. So please, feel happy that someone has taken the time to point out something wrong in you and is giving you suggestions to improve on it. Peace. Please Register or Log in to view the hidden image!
Yes, you got some unfair treatment and that is sad. And for what it's worth, I agree with everything you've described. There's going to be a couple of people here (if they bother to read this) that will probably complain and say that I've given out the same treatment as you are describing. The situations, however, were much different. You came here and asked a simple question about a thought you had and that's exactly how it should be. The others that I'm talking about didn't take your honest approach. Some came in here promoting their personal ideas as "theories", which they didn't even qualify as, and actually contained some very bad, inaccurate science. Another young man with a hugely over-blown ego argued against basic science and known technology (first saying it couldn't even work). Then he compounds his error by learning just a little - and then trying to claim that he knew that all along! Bad attitude, very bad approach. So as long as your are honest about what you know and what you don't know and simply try to learn, you'll do fine - especially with me. And when someone slaps you, like the instance you've mentioned here, just realize that they are the real dummy and just keep moving forward. It also helps that you have revealed your age (which my particular smart-alec would never do, though I asked) because people won't expect you to know everything in the world yet.
I think that speculators in futures should be thought of as operating in the middle in between the suppliers and consumers of the commodity. The suppliers and (big corporate or wholesale) consumers created the futures contracts as hedges against the chaos and the destruction of their business plans which would occur if large swings in commodities prices happened without the corporations having hedges in place in the form of future contracts. In the end, regardless whether the last speculator to own the contract, takes delivery of the commodity or sells his contract to a end user of the commodity, the price is determined by what the end users are willing to pay for the commodity at that time. Owning a contract is not as expensive as owning the product. The storage facility costs something, but more importantly a commodity sitting in storage costs you the interest that on the money that you have borrowed to buy the product or costs you the interest that you would have recieved from the bank on your money had you not bought the product. If you have oil tanks you are not a pure speculator. You are probably a distributor. If you wanted to be a speculator and you thought the price of oil was too low on the day your contract would have you take delivery of oil, then you sell the oil anyway and use the proceeds to buy another futures contract with a later date. I see no reason to ever take delivery of the oil if you can't use oil. But I don't know much abbout the commodities markets so maybe I am missing something. Somebody might get confused about options versus futures. Options are different from futures because options can expire unexerised.
I give the kid his due, he's certainly savvier than I was at that age, but I think he should lose the Pollyanna glasses for his own good. And Syed - could you do us adults a favour and state your age? That way I can be a little more pleasant to you as I would be with all kids; you're going to have people speaking harshly to you throughout your adult life, and this website - both despite and because of it's high level of intellect - is going to start that process early. But if you state your age, more of us will be able to determine how best to address to you. A few will use that information to decide whether to respond to you at all. I probably wouldn't have replied, to be honest; but that's an issue with me, not you. Keep asking questions. Jaybee.
