Rollover on oil/gas

I am mostly studying and getting prepared to act on opportunities.
one such opportunity would be when oil went below 20$ at the beginning of corona. Correct me if i’m wrong, but there is no way it would not go up and at least more than double again in the future. Similarly, when oil was 130$, it seems to me like a sure bet to short it. So if that happens again, i want to be able to do so without screwing up.

For a start, i am not looking for leveraged positions. Surely i would have bought the oil when it was like 30$ instead of <20, so leverage would have killed me. I am looking to trade these things without leverage. Also, i am expecting to have to hold my position for anything between months and a few years.

Now i have made different trading accounts. I have trade republic, mexem, and plus500. It seems i can only take position in oil with borrowed money on plus500. The overnight fees seem to amount to about 2.5% for a short position and 12.5% for a long position. Not great, but buying oil at 20 still seems like a great deal, even if i have to hold it for 2 years before i can sell it above 50.

What worries me however is the rollover adjustment. I used a practice account to see what happens on the rollover and understand that my net value remains the same. However, if the rollover consistently coinsides with a move in the same direction i am supposed to profit from, i could lose a bunch of my potential profits like that.

So my questions are:
-Is there a standard way the price moves during rollover ? Like, do new contracts usually start higher than old ones ? or do they generally start higher/lower depending on the trent, or is it even as bad that the powers that be in the financial markets influence this and is the game rigged against me like that ? (as in, they know the positions of the small traders or what they consider “dumb money” and make the markets move to cause me losses. Or even worse, would plus500 rig the game against me)

-Is my worry justified, or is the rollover adjustment going to insignificant in the grand scheme of things for my planned trade strategy?

-Is there another way to invest in commodities without having to deal with rollover ?

-Is there another way to invest in commodities without having to use borrowed money and thus preventing overnight fees? (not including the purchase of a giant tank in my backyard)

-And of course i am open to any other thoughts or suggestions on the topic.

If there is a recession, oil consumption will fall. And oil prices should fall too. But usually OPEC will cut production to support price.

Its a loaded game with a small group in control.

Still best to buy low and sell high.

Twenty years ago Hubbards rule predicted oil production would peak and decline. Then came fracking. Bummer!!

Now global warming says oil is a dying industry. Good time to invest?

For me its not a good time to invest in oil now because the price is pretty much exactly in the middle. Could go both ways from here. It being at 20 was a good time to invest because of the certain upside.

That is btw imo something unique about oil. The fact that price is controlled. If we look at stuff like cryptos, there is unlimited potential both up and down. I cannot rule out that btc is going to either zero or 150k. Same is true for most other things. Like euro/dollar, it is quite possible it will never be higher in the future or never lower. With oil we know that it will never go to zero and if its well over 100, it will extremely likely come back down again.

Nothing on the other questions i asked ?

1 Like