How to Play Rising Gasoline Prices
as published at http://www.stockpickr.com/how-play-rising-gasoline-prices.html
NEW YORK (SmartStops) — President Obama made some commentsover the weekend that there is no “silver bullet” to help bring down gas prices. While this isn’t what most Americans want to hear, investors and traders can profit from rising gasoline prices to help hedge their daily expenses.
If you believe that Obama is right, here are a few ways to profit from rising gas prices, either by playing certain ETFs or specific equities.
In his weekly radio address, Obama said: “Now, whenever gas prices shoot up, like clockwork, you see politicians racing to the cameras, waving three-point plans for $2 gas. You see people trying to grab headlines or score a few points. The truth is, there’s no silver bullet that can bring down gas prices right away.”
Rising gasoline prices should benefit names such as Exxon Mobil (XOM), Chevron (CVX), ConocoPhillips (COP) and Occidental Petroleum (OXY). Occidental Petroleum is the one to look at most closely, as it tracks the price of oil the closest, almost in lockstep with the chart of West Texas Intermediate crude oil.
Some ETFs to consider for rising gasoline prices are the U.S. Gasoline Fund, (UGA), which tracks gasoline prices, and the U.S. Oil Fund (USO) and the U.S. 12 Month Oil Fund (USL), both which track the price of oil. The difference between USO and USL is that USO only tracks the front month oil contract, whereas USL tracks all 12 monthly contracts. This takes the issue of contango out of play. USO has many more assets under management, with $1.7 billion in assets, while USL has $270 million in assets.
Trend Analysis: These names, especially the major oils, have been in uptrends since November, as quantitative easing and higher oil prices continue to benefit the exploration and production names.
Risk Analysis: If you want to play rising gas prices by trading any of these symbols, be sure to first determine your risk management strategy. For UGA, potential problems could arise if it should break the current price point of $50.90. When buying in, be sure to have the right amount of quantity based on your risk. A free position sizing calculator is available at SmartStops.net