Still think USO is a great way to invest in Oil?
An Interactive Broker trader with a $77,000 account thought he would outsmart every institution and every big Oil trader, the result? A $9 million loss.
Well done.
IB normally doesn't take beginners, you need 2 years experience to trade FX with them (haven't checked futures so I don't know what the rule is for those), and the min account size is 10,000.
This day trader (go figure) thought he was smarter than every one, and he went all in, he bet the farm. This alone is stupid, but he went all in without doing his research!
Probably a "technical analyst". Weird, I thought magical esoteric TA told you everything you need to know, that everything was built in the chart and info not in the chart was useless noise. Didn't his magical TA tools tell him it would go negative? Well actually if he looked at the ATR / implied volatility he would have seen....
Even I, that has negative balance protection and guaranteed stops, went on the CME site to check announcements.
They don't exactly talk about negative prices nor clearly about limit up limit down, but here, with Oil massive volatility, they did confirm that yes indeed they were prepared for negative prices.
Thomas Peterffy (the hungarian market billionaire that is not George Soros) said 5 days wasn't enough for IB to update their platform and that's obviously true.
Now maybe they should have warned people with messages on the interface, e-mails, maybe set some hard limit to what their clients can do.
Maybe they should have had code ready at all time in case this happens. Maybe they share the fault, maybe not.
But anyway, being a customer friendly broker, they absorbed losses over 100 million.
Meanwhile I did my research, I shorted June contract and made money, and I'm fighting with my shady broker to withdraw some of my gains...
They have been condemned by the french regulators years ago for shady business practices go figure, but every retail broker has!
And the vast majority of their clients are retail. I'm waiting and waiting and waiting... I have resisted insulting them or calling the regulator for now.
The only other broker to give me a hard time was Kraken. They mention anti laundering laws and more, and I understand, but why be so unclear, and ask for documents 5 times rather than all at once, and why ask for the same documents several time, and why be so difficult, only when someone made money?
Short Bitcoin on Kraken which was clearly very pro bull, short Oil on *** which had a massive number of retail short sellers (they were on the June contract thought), and then it's an issue. Never had a single problem buying Bitcoin and sending it to a wallet, never a problem when losing money, extreme ease to deposit and start paying commissions, without any warning "getting it out will be very hard". "It's quick instant easy" ye sure, no it's not.
The fund running USO clearly said it was a tool for short term bets. It's not made for massive hoardes of dumb money to buy and hold.
They have spread over several months to be more nimble, ye looks like its working great!
I heard reverse splits were a good sign, that it was smart to invest in a stock after it made a reverse split.
Once again, retail that never in their lives made money consistently, thought they knew better than every one else, and that they would get rich quick.
Once again, I warned people with what little visibility I had.
Once again I was right and retail is getting wiped out.
Bagholders are going to argue, they are going to say "just wait", and any spike up will be their celebration and "told you so" "this is it".
Same old story. They'll keep arguing, they'll keep bagholding, they'll keep losing.
Dumb money at its finest: never understand when you lost. You can never tell them "told you so" because in their mind it's always just a matter of time.
When it gets delisted they'll have no choice but to understand they lost, and still then they'll go full lawsuit and dream of getting their money back.
How long for this? 5 years? 10 years? Apple Sapphire screen bagholders as I posted recently have gotten like 4% of their money back on average.
An average smart (average of the ones in the top) investor or speculator in 10 years will be up 15% compounded, so +300% (turn the total into 400%), and dumb bagholders that wanted to get rich quick "15% a year looool that's pathetic" will be spending their time in courts and dreaming of getting 4% back (turn the total into 4%).
Delusion at its finest. There is no free lunch...
If Oil was priced at $0.01 there was a very good reason for it.
Oil traders weren't just selling at this price because "emotions" "rsi very oversold".
It's so risible that some complete noobs that don't understand anything they are doing thought they are just so much smarter than the market, and that whales were just "being emotional" and selling a barrel of Oil at $5, $3, etc just because they were "scaaaaared".
Homer Simpson really thought "Aha! Whales are selling Oil at $1 a barrel but they are scared. I, Homer J Simpson, know something they don't! Oil is worth more. I am a visionary!"
It's like when Homer went hunting for a Turkey, he just put a nice plate down with rice and other food in, then shouted "Come on Turkey come join your friends" and pointed the gun towards the plate with a big smile on his face, fully convinced a Turkey would jump in his plate.
I thought the Simpsons were ridiculous and overly exagerated when I was a kid. How wrong I was.
My broker lets me set an order to short USO. Oh my, I sure know what I'm going to do! 2 possibilities actually.
The Difference Between Stupidity and Genius Is That Genius Has Its Limits.
Well done.
IB normally doesn't take beginners, you need 2 years experience to trade FX with them (haven't checked futures so I don't know what the rule is for those), and the min account size is 10,000.
This day trader (go figure) thought he was smarter than every one, and he went all in, he bet the farm. This alone is stupid, but he went all in without doing his research!
Probably a "technical analyst". Weird, I thought magical esoteric TA told you everything you need to know, that everything was built in the chart and info not in the chart was useless noise. Didn't his magical TA tools tell him it would go negative? Well actually if he looked at the ATR / implied volatility he would have seen....
Even I, that has negative balance protection and guaranteed stops, went on the CME site to check announcements.
They don't exactly talk about negative prices nor clearly about limit up limit down, but here, with Oil massive volatility, they did confirm that yes indeed they were prepared for negative prices.
Thomas Peterffy (the hungarian market billionaire that is not George Soros) said 5 days wasn't enough for IB to update their platform and that's obviously true.
Now maybe they should have warned people with messages on the interface, e-mails, maybe set some hard limit to what their clients can do.
Maybe they should have had code ready at all time in case this happens. Maybe they share the fault, maybe not.
But anyway, being a customer friendly broker, they absorbed losses over 100 million.
Meanwhile I did my research, I shorted June contract and made money, and I'm fighting with my shady broker to withdraw some of my gains...
They have been condemned by the french regulators years ago for shady business practices go figure, but every retail broker has!
And the vast majority of their clients are retail. I'm waiting and waiting and waiting... I have resisted insulting them or calling the regulator for now.
The only other broker to give me a hard time was Kraken. They mention anti laundering laws and more, and I understand, but why be so unclear, and ask for documents 5 times rather than all at once, and why ask for the same documents several time, and why be so difficult, only when someone made money?
Short Bitcoin on Kraken which was clearly very pro bull, short Oil on *** which had a massive number of retail short sellers (they were on the June contract thought), and then it's an issue. Never had a single problem buying Bitcoin and sending it to a wallet, never a problem when losing money, extreme ease to deposit and start paying commissions, without any warning "getting it out will be very hard". "It's quick instant easy" ye sure, no it's not.
The fund running USO clearly said it was a tool for short term bets. It's not made for massive hoardes of dumb money to buy and hold.
They have spread over several months to be more nimble, ye looks like its working great!
I heard reverse splits were a good sign, that it was smart to invest in a stock after it made a reverse split.
Once again, retail that never in their lives made money consistently, thought they knew better than every one else, and that they would get rich quick.
Once again, I warned people with what little visibility I had.
Once again I was right and retail is getting wiped out.
Bagholders are going to argue, they are going to say "just wait", and any spike up will be their celebration and "told you so" "this is it".
Same old story. They'll keep arguing, they'll keep bagholding, they'll keep losing.
Dumb money at its finest: never understand when you lost. You can never tell them "told you so" because in their mind it's always just a matter of time.
When it gets delisted they'll have no choice but to understand they lost, and still then they'll go full lawsuit and dream of getting their money back.
How long for this? 5 years? 10 years? Apple Sapphire screen bagholders as I posted recently have gotten like 4% of their money back on average.
An average smart (average of the ones in the top) investor or speculator in 10 years will be up 15% compounded, so +300% (turn the total into 400%), and dumb bagholders that wanted to get rich quick "15% a year looool that's pathetic" will be spending their time in courts and dreaming of getting 4% back (turn the total into 4%).
Delusion at its finest. There is no free lunch...
If Oil was priced at $0.01 there was a very good reason for it.
Oil traders weren't just selling at this price because "emotions" "rsi very oversold".
It's so risible that some complete noobs that don't understand anything they are doing thought they are just so much smarter than the market, and that whales were just "being emotional" and selling a barrel of Oil at $5, $3, etc just because they were "scaaaaared".
Homer Simpson really thought "Aha! Whales are selling Oil at $1 a barrel but they are scared. I, Homer J Simpson, know something they don't! Oil is worth more. I am a visionary!"
It's like when Homer went hunting for a Turkey, he just put a nice plate down with rice and other food in, then shouted "Come on Turkey come join your friends" and pointed the gun towards the plate with a big smile on his face, fully convinced a Turkey would jump in his plate.
I thought the Simpsons were ridiculous and overly exagerated when I was a kid. How wrong I was.
My broker lets me set an order to short USO. Oh my, I sure know what I'm going to do! 2 possibilities actually.
The Difference Between Stupidity and Genius Is That Genius Has Its Limits.
Trade active:
Ye screw it I just shorted a few. No point overthinking it.
I know what I am doing, I know what the max risk is. All good.
I know what I am doing, I know what the max risk is. All good.
Comment:
Learned a bit more, articles mention this canadian indian guy, and they also speak of a german trading on behalf of 2 friends (probably not anymore, sworn enemies now).
Syed Shah normally trades FX & Stocks. So safe to assume he has at least 2 years experience?
He had the very bright idea to go first timer all in a futures contract, without even knowing what a futures contract was evidently.
He thought something along the lines of "woohoo dumb oil traders! This is the deal of a lifetime! I must rush in no time to waste! (car dealers really love him)."
I wonder how these people exist.
I am imagining something along the lines of
"Oh that's a beautiful log of wood in the crocodile infested river. No one is grabbing it haha idiots, more for me!"
How did natural selection allow this? Maybe Darwin was wrong, or not entirely right.
This is EXACTLY how I see a day trader
Start of day: $77,000
End of day: -$9 million
Dear diary, I lost everything again.
The CFTC said to brace for negative prices again (but they have no clue) as early as next week.
Nah, according to retail traders Oil demand skyrocketed already, even thought as I said in May storage was near full and it would just get worse in June.
markets.businessinsi...rs-2020-5-1029202506
Now storage is full and all but the futures contract might not go negative as traders have been more careful this time. Or maybe it goes to -100.
Maybe Oil producers are dumping Oil into the ocean too.
A trading house bought 250,000 barrels (250 contracts).
"BB Energy trades 20 million metric tonnes of crude and petroleum products annually." So correct me if I'm wrong about 150 million barrels, or 150,000 contracts equivalent. They must have made a couple of millions out of this but they're pretty big.
Some site estimates their revenue at 40 million, bloomberg read panama payers and estimated they made 10 billion in 2012? How much they traded in 2012? Because 10 billion revenue on 150 million barrels means over $60 per barrel.
markets.businessinsi...ls-2020-5-1029201266
Well anyway, I did the same as Shah, I am shorting an ETF rather than stay in my field.
But I have a guarenteed stop and I'm not so dumb that I'll try staying in until zero, I won't add to my winner I won't average in on the way up because I am not braindead, and I'll try to close my short before trading is halted, or before it goes to zero.
And even if it gets halted and I'm left holding the bag, big deal.
Syed Shah normally trades FX & Stocks. So safe to assume he has at least 2 years experience?
He had the very bright idea to go first timer all in a futures contract, without even knowing what a futures contract was evidently.
He thought something along the lines of "woohoo dumb oil traders! This is the deal of a lifetime! I must rush in no time to waste! (car dealers really love him)."
I wonder how these people exist.
I am imagining something along the lines of
"Oh that's a beautiful log of wood in the crocodile infested river. No one is grabbing it haha idiots, more for me!"
How did natural selection allow this? Maybe Darwin was wrong, or not entirely right.
This is EXACTLY how I see a day trader
Start of day: $77,000
End of day: -$9 million
Dear diary, I lost everything again.
The CFTC said to brace for negative prices again (but they have no clue) as early as next week.
Nah, according to retail traders Oil demand skyrocketed already, even thought as I said in May storage was near full and it would just get worse in June.
markets.businessinsi...rs-2020-5-1029202506
Now storage is full and all but the futures contract might not go negative as traders have been more careful this time. Or maybe it goes to -100.
Maybe Oil producers are dumping Oil into the ocean too.
A trading house bought 250,000 barrels (250 contracts).
"BB Energy trades 20 million metric tonnes of crude and petroleum products annually." So correct me if I'm wrong about 150 million barrels, or 150,000 contracts equivalent. They must have made a couple of millions out of this but they're pretty big.
Some site estimates their revenue at 40 million, bloomberg read panama payers and estimated they made 10 billion in 2012? How much they traded in 2012? Because 10 billion revenue on 150 million barrels means over $60 per barrel.
markets.businessinsi...ls-2020-5-1029201266
Well anyway, I did the same as Shah, I am shorting an ETF rather than stay in my field.
But I have a guarenteed stop and I'm not so dumb that I'll try staying in until zero, I won't add to my winner I won't average in on the way up because I am not braindead, and I'll try to close my short before trading is halted, or before it goes to zero.
And even if it gets halted and I'm left holding the bag, big deal.
www.sec.gov/Archives...51/v375098_424b3.htm
The 1940 act... the one that says "Stock issuers cannot ask investors for money"
Or in layman terms "Investors cannot get uber rekt by negative prices"
"NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES OFFERED IN THIS PROSPECTUS, OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
USO is a commodity pool and USCF is a commodity pool operator subject to regulation by the Commodity Futures Trading Commission and the National Futures Association under the Commodities Exchange Act."
The CFTC prob going to hit USO with a fine but that's just my opinion.
First of all if you think an ETF can't go to zero, well I have bad news for you:
4 years ago seeking alpha was warning retail investors against this scam:
seekingalpha.com/art...on-in-uwti-is-gamble
Like alot of people I think ETFs are a really dumb way to take a speculative position or invest. I shorted USO but that's different hey.
Can you make money via proceeds of selling those scams? I don't know.
Maybe. Retail investors joyfully buy absolute garbage that they don't understand, not impossible there is a way to extract some money out of it. Haven't done my Due D thought. Might look into it.
An ETF can go negative because when you are buying at 0.01 and selling at 0 and pay $10 fees on each operation, effectively the price is negative at that point for you.
USO people have clealry stated their fund was for short term plays, but when it went from being small to max size, with the number of "investors" going up several orders of magnitude, and they started seing sky high fees and money under management, they quickly changed their tone and asked regulators to increase the limit.
If 10 billion flows in and they can grab 0.1% that's 10 million in fees that goes into their pockets, compared to less than a million usually, for example (using random numbers here to give an idea). Plus they could be collecting interest on all that massive money that ends up in their coffers.
Final question: Can the traded price on the chart go below zero?
There is no definitive answer, I can't answer this with a clear "yes" or "no".
You're supposed to adapt your sizing to the volatility all the time...
Until now there always has been ample warning before massive moves.