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Wednesday, June 4, 2008

Dennis Gartman, Short Oil

Dennis Gartman is somebody who’s insight I greatly respect:

Gartman Tells CNBC He's `Short' Crude Oil, `Long' Natural Gas: “Dennis Gartman, economist and editor of the Gartman Letter, told CNBC he's "short" crude oil against a natural gas investing position.

“I've been in and out of oil for a long time,” he told the financial news channel. “The only oil position that I have on right now, I'm short crude oil and I'm long natural gas. That's been a wonderful trade.”

Gartman also said he doesn't have a net outright position in crude oil because he's “too afraid of it.”

“Things that move 4 percent, I don't want anything to do with,” he said.”

Being a financial ninja I do trade crude short outright. However, I do prefer to avoid heart attacks and stains in my pants whenever possible. Therefore, when I trade crude from the short side I do it using options. This allows me to avoid that Black Swan event that I just know is stalking me personally…

Guys like Mahmoud Ahmadinejad and Hugo Chavez have a nasty habit of spawning political Black Swans and oil just happens to be a political animal at these prices.

I’ve been shorting oil from $133 (after the pre-market spike to $135 that didn’t ‘stick’) using $130 and $125 strikes. I have a core position around which a trade.

Oil is in a bubble. Believe it. I’m not going to argue about Peak Oil. It really doesn’t matter. Parabolic prices are not sustainable. Period. End of story.

I’ve posted on parabolic moves many times…

Related Posts:
Oil Crisis and the Blame Game
From Bubble To Bubble, More Hidden Losses
Parabolic Commodities: The End is in Sight
Life After Things Go Parabolic, This Bounce Too Will End
When The Momos Go Parabolic
Dammit, Why Won’t You Learn?

In Oil Crisis and the Blame Game I argued that: “Maybe we can hammer out a top around here somewhere... Money has been flowing into inverse energy ETFs (DUG for example), indicating that money is for the first time attempting to call a top. Oil and Gas shares have fallen even as oil blew through $130 and immediately tagged $135.

Big energy companies, such as Exxon Mobile (XOM) failed to sustain new highs even as oil rallied hard. Something is up. Pop, and drop. XOM broke resistance and then immediately FAILED. Hmmm...”

Since then crude has indeed come off.


Anonymous said...

I'm reading some whisps that there is more than passing chance of an attack on Iran on the 'nukes' excuse. That, in combination with the production and export numbers would give me serious misgivings about anything other than a very short term short strategy.

short shorts....ewwww

Vijay said...

Another way to play the shorting oil game without having to worry about the Black Swan is to use DCR. It's hella volatile so beware. Also, it's set to close soon because oil closed above $110/barrel.

ps LOVE your blog. Keep the awesome ninja moves comin'

Anonymous said...

Love the blog but Peak Oil is going to obliterate everyone's idea about what the "rules of trading" are. It's a totally different game out there.

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