Wednesday, May 5, 2010

A Buy Sell Strategy Switching Between Oil and Natural Gas

This post documents a stragegy I am trying with oil and natural gas.

Oil has been trading in a range for months, and natural gas is in general declining, with ups and dows due to the weekly inventories reports. I have been using a strategy for buying and selling both oil and gs, through Toronto's HND and HOD (or HNU/HOU). Both are ultra ETFs (the kind that should never be held for any long time periods).

NG is bought and sold after big moves after inventories. Oil is bought and sold when it approaches its trading edges ($85/$80).

This is what I have done. Top chart is HND, bottom chart is HOD:

  • Bought HND on April 23 at $ 7.80 after the high rise due to inventnories (and correspoding plunge in HND, since it is a a bear ETF)
  • Sold HND on April 30 at $8.99, after the plunge in NG prices, also after inventories. ROI was 15%
  • Bought 1/2 position of HOD later on April 30 at $7.60. I am aiming to sell this today.

Note that my initial position of HND actually dropped in price after April 23, before recovering. because fo this and also because my confidence in oil was not a shigh, I only bought a 1/2 position in HOD. The intent was to buy a further 1/2 if HOD dropped further (>5%). It looks however, that I will be exiting the 1/2 position as it reaches my target profit of ~10%.

UPDATE: Out of HOD at 10:26AM at $8.67 (before inventories release)

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