As discussed in my latest column, over the past few years, it has become increasingly easy for anyone to play different strategies and markets that were unavailable only a couple of years ago. One of the best examples is surely oil!! It’s the story everyone has heard about. In the past year, oil has more than doubled and many reasons are given to explain the rise. Mainly, the constant demand rise (especially from emerging economies as well as China (not getting into the debate about China being an emerging economy today!). Also, a lot of blame has came from a lot of new investors now investing in this market. I say blame because mostly the rise of oil has hurt consumers around the world, but like any price movement, it’s possible to profit from it (more later!)

But there also seems to be a growing sense that oil is giant bubble that will collapse one day or another. Possible? I certainly believe this thesis. Of course, it’s difficult to predict if the fall will come after oil has reached 150$, 200$ or more… We have all heard crazy predictions but it’s exactly when something is always expected to go up that they eventually go down.

So anyway, today I wanted to present 3 different ETF’s that give you the option of playing the oil market. First off, USO, one of the biggest ETF’s around, that generally moves very closely to the movement of the crude oil that we all hear about. It is a great way to get into the oil investments without all the complications of buying futures (margins, rolling your positions to avoid delivery, etc). As you can see from the graph above, USO has risen about 50% in the past 6 months, not a bad investment hey?

Then, I will also introduce 2 leveraged ETF’s. In the near future, I will discuss the pro’s and con’s of constant leveraged ETF’s (there are obviously some drawbacks). Basically, the aim of these funds is to replicate the return of an asset (Oil in this case), but double the return. So you can buy the BetaPro Bull Fund (HOU.TO) and it should return 200% of your return (minus fees). If you think Oil will go down, it’s time to buy the Bear fund (HOD.TO). As you can see from the graph the returns were a lot more volatile, but if you got it right 6 months ago, you would have enjoyed a 100% return instead of of 50%. But then look at the nice graph from the Bear Fund and you can imagine what would have happened if you thought 100$ for oil was way too much.

So that’s it for now! Best of luck in your oil investments!

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