Here's one analyst's idea on how Australian traders can profit from crude oil's volatility

Getty/David McNew

Crude oil has crashed more than 50% from $100 a barrel in July last year to under $45 in January.

It’s been volatile since with wild daily moves – last night Nymex crude rose more than 5%.

For traders, volatility means opportunity to profit.

Naturally, the easiest way to trade oil is to trade oil directly on a futures exchange or through a broker – like I do.

But, many traders and investors prefer the stock market and in a note to clients, Rivkin CEO Scott Schuberg has outlined how Australian traders can profit from the big moves in oil and their own expectations about its future movements.

If you’re wishing to take a view on the oil price but you’d prefer to use shares, you have two options:

1. Buy a ‘long’ or a ‘short’ oil exchange traded fund (ETF) – there are many these funds listed on the Rivkin Trader platform and traders will often go with the big names like Blackrock’s iShares, Vanguard or State Street’s SPDRs. You can browse the thousands of ETFs on Rivkin Trader by opening a demo account for free.

2. Take a corporate view by buying or shorting an oil company’s shares. This takes a little more knowledge, as there are explorers, producers and refiners within this industry, among others. If one took a negative view on Caltex (CTX) last year, for instance, they will have done very poorly, as Caltex benefited from a short-term spike in margins as they bought crude cheaply and took their time dropping the price of gasoline prices. Woodside Petroleum (WPL) on the other hand suffered, and Horizon Oil (HZN) was hammered given their dependence on a higher sale price for crude – so buying HZN now would be a highly leveraged bet on a recovering oil price.


Trading oil at such a crucial time is a dangerous business. There are some pundits who believe it will bottom here around $50 a barrel. But others such as Citi believe it is going to fall to $20.

So, be careful out there.

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