Awash with Oil

Published on: August 21st, 2017

Raoul has been a bear on Oil for some time. The moment has come to add to positions on the short side…

Comments

  • GB
    Greg B.
    14 October 2017 @ 19:53
    RP, can you comment on Art Berman's thesis?
  • LM
    Lawrence M.
    15 September 2017 @ 23:31
    Hello all, I may be a little over my head on the macro insiders, so I apologize if my question seems silly to most. Finally got an options account open and wanted to follow through with the XOM put. The account has a few options (buy to open, buy to close, sell to open, sell to close). If someone could give me a little direction on how to execute this trade I'd appreciate it. Apologies again, I'm just an average guy who's interest in finance has taken off since joining the real vision community. I'm fine with losing a bit to gain some know how (worst case scenario).
    • JB
      Jason B.
      16 September 2017 @ 16:58
      Lawrence - I'm the same way, very recent introduction to finance and RV has been instrumental with it. If you're looking to buy puts, first thing you'll do is buy to open. When you want to exit the trade, you'll sell to close. On the other hand, if you're looking to sell options (Like in this put spread), you'll be selling to open and buying to close when you exit. Does this make sense?
    • AF
      Avi F.
      17 September 2017 @ 21:23
      My $.02 Lawrence -- do yourself a favor and trade on paper for a little while to avoid costly lessons as you get up to speed on options basics. Learning live could be very costly if you don't understand your risks (potentially unlimited if you sell naked calls for instance), the amount of leverage embedded in your trades, the possible payoffs, etc. There are a lot of resources to learn this for free, and some platforms offer paper trading to start out.
    • BT
      Bryan T.
      29 September 2017 @ 21:40
      Lawrence depending where you open an account placing options trades can be relatively simple or exceedingly confusing. For simplicity I like ETrade (formerly OptionsHouse). Open an account, request options trading authority (which you'll need to do wherever you open an account) and wait for approval. AT ETrade this trade set up is as easy as clicking on Trading, then options, then bring up Exxon (XOM) click on Put Spread and it sets the trade up for you. This is a Bear Put Spread so read up on that and you will better understand the trade. You would then place the trade: buy to open $70 XOM Sept 2018 put and sell to open $60 XOM Sept 2018 put. On the other hand...to experience initially confusing option trading go to Interactive Brokers. I don't think I would start there...go with ETrade. I struggled for a while to understand all this but with practice you'll get it. Open a paper trading account where you trade using a virtual account and get the hang of it all. Go to thinkorswim.com and set up a paper trading account to virtually trade options. Best of luck.
  • ca
    courage a.
    2 September 2017 @ 15:08
    Do you think the US debt ceiling being raised will be enough to push the dollar up and cause oil to drop ?
  • BK
    Bruce K.
    1 September 2017 @ 16:39
    My embarrassment is your entertainment. Some weeks back, I added the front-month contract for light sweet crude to my watch list. Earlier this week, I was surprised that it didn't change for three days in a row. You got it: it was no longer the front-month contract. I moved over to the September contract *and* added a monthly reminder tickler.
  • MN
    Mark N.
    28 August 2017 @ 15:45
    Any thoughts on the Trump Administration upping the rhetoric on Venezuela and Iran? A Venezuelan embargo would have huge implications on US refiners.
  • MS
    Morten S.
    22 August 2017 @ 17:41
    Any Europe-based clients with some recommendations on trading platforms? I have looked into Saxobank recently and I thought they had pretty much everything. But they don't offer XOM options and in FX- and eurodollar options I can only do vanilla ONE bid or offer at a time - so no mid-price when doing strategies like put- or call spreads. Any suggestions?
    • RP
      Raoul P. | Founder
      22 August 2017 @ 23:38
      Have you tried Interactive Brokers?
    • PG
      Paul G.
      23 August 2017 @ 07:34
      same problem here in Aussie. Will try Interactive Brokers or if any others have Aussie recommendations
    • IO
      Igor O.
      23 August 2017 @ 15:59
      Interactive Brokers obvious choice. I am in the UK
    • MS
      Morten S.
      24 August 2017 @ 12:18
      Thanks! I am in the KYC process. Will be up and running in less than a year - If I am lucky :)
    • JL
      J L.
      25 August 2017 @ 02:39
      got my acc in 3 working days Morten, GL
    • HB
      Harvey B.
      27 August 2017 @ 22:57
      I recently moved to Interactive Brokers, so far so good, their platform is better than the several I've used previously, esp for options. I'm based in UK using them for mostly US stuff.
  • DY
    Dmytro Y.
    26 August 2017 @ 13:50
    I trade futures options and am short Oil now. Very happy to see Macro insiders to make something on commodities and not just financials. Agree in direction but disagree to your strategy. To wait for oil to drop to usd 42 for WTI is too late to start shorting. It's 15 percent fall from today level and that would be substantial drop. If oil drops to that level then OPEC and Saudi might take new action in Nov 30 meeting. Our common friend Erik Townsend at Macrovoices made a good podcast this week too on this subject. Thank you for Oil piece and hope to see more on commodities space.
  • TM
    Ty M.
    24 August 2017 @ 11:41
    Here is what I am seeing on the chart. USD strength here will have a clear outcome. http://cdn.ceo.ca/1cpteov-Screen%20Shot%202017-08-24%20at%2009.50.23.png
  • KB
    Krystof B.
    22 August 2017 @ 14:01
    What is the red support line in SXEP? I looks like 240 or so. And would you go for the same length with the puts as in the XOM(1 year)? Thank you
    • RP
      Raoul P. | Founder
      22 August 2017 @ 22:04
      Its around 240 but its a very long term chart so wiggle room needed. I think that plays out longer...next three years. Maybe just a short vs eurstoxx as a pairs trade?
  • RT
    Ricardo T.
    21 August 2017 @ 15:57
    For the XOM option spread, isn't it risking $2 to make $8 rather than $10?
    • RP
      Raoul P. | Founder
      21 August 2017 @ 16:40
      Risking $2 to get $10 back would be the right expression...my fault, sorry.
    • BK
      Bruce K.
      21 August 2017 @ 23:12
      Great piece, Raoul. You lay out the "story" cleanly, and provide a clear trigger and action. Your trigger is a break of the $42 level ... on what measure? WTIC?
    • NI
      Nate I.
      22 August 2017 @ 20:57
      Caution on shorting XOM. It's ground zero for ETF inflows. The stock price is decoupled from the company fundamentals.
  • DG
    Don G.
    21 August 2017 @ 20:21
    The XOM put spread works on 3 levels. Short oil, short S&P, and short XOM.
    • HB
      Heini B.
      21 August 2017 @ 22:28
      And a fourth as it's over-owned in ETFs may really accelerate the downside.
    • RP
      Raoul P. | Founder
      21 August 2017 @ 22:36
      Good points... especially the ETF one! Thanks
    • NI
      Nate I.
      22 August 2017 @ 20:54
      XOM is ground zero for the ETF vortex. ETF flows have decoupled the stock price from its fundamentals. XOM is in over 100 ETFs and with good reason. The fund sponsors need a big sponge to soak up the cash. Raoul could be 100% right about oil and XOM could keep going up. I wouldn't short it unless the ETF inflows slow.
  • AD
    Alexander D.
    22 August 2017 @ 14:11
    Does anyone see a tie-in to the deep water drilling market? Obviously they have been negatively effected and beaten down harshly, with some saying there is no future for the market to speak of at all. So perhaps there is more downside to short or are these stocks already beaten down so far XOM is the better play?
  • EF
    Eric F.
    22 August 2017 @ 13:04
    Great analysis and great piece. No one can predict the future but I really like the odds and potential rewards here. I'm going to dip toe in with small bet but am also curious as to what would be the best options to buy puts to short oil? Or if anyone can point me in right direction that would be most appreciated.
  • TM
    Todd M.
    22 August 2017 @ 01:19
    Nice piece. The challenge is the Dollar. On the weekly since Jan 1 /DX is down about 10% and /CL down 11%. Oil is very weak in that context! If the Dollar now increases - Oil should take a real tumble. Gold has just moved up inverse to Dollar weakening. Too bad we can't denominate futures in Bitcoin and have some real fun :)
  • SB
    S. B.
    21 August 2017 @ 19:27
    Russell Clark made a point in his interview about a possible bust in the shale companies because easy production is being pulled forward. This would play out in the next few years. Do you think that oil could decline short-term 1-12 months, and increase longer term 1-2+ years?
    • GM
      Gerald M.
      21 August 2017 @ 19:59
      It's extremely difficult to predict 1-2 years out. A surprise war or interest rate move can make a huge difference and those are just one news announcement away. There is no controlling that. But there are some interesting fundamentals at play. An important one is here: http://business.financialpost.com/commodities/energy/1412412/wcm/5e4cb33d-2ad2-4445-a260-96677f938b6a Another is here: http://www.lockheedmartin.com/us/products/compact-fusion.html
    • RP
      Raoul P. | Founder
      21 August 2017 @ 22:36
      For the oil price to balance over an extended period of time we are going to have to see lower prices and a bust in shale. Also, the shale guys can come our of bankruptcy protection (or change hands) if oil rebounds and pump again. We saw this in 2015/16. The price of oil therefore needs to go down and stay down for much longer than anyone expects. That is how secular bear markets tend to play out.
  • gm
    gordon m.
    21 August 2017 @ 17:45
    This analyst seems to feel oil majors are going to rebound soon ... https://seekingalpha.com/article/4100069-big-oil-stocks-nearing-capitulation-get-buying-list-ready?li_source=LI&li_medium=liftigniter-widget
    • GM
      Gerald M.
      21 August 2017 @ 19:49
      That analyst is trying to call a bottom while acknowledging XOM is at a 52 week low. That's foolishness. Raoul's analysis makes the Seeking Alpha guy look like a novice too.
    • RP
      Raoul P. | Founder
      21 August 2017 @ 22:33
      with a one year options strategy with defined risks I am indifferent to the ups and downs or a few day, weeks or even months. I am just interested in the longer-term trend.
  • TA
    The A.
    21 August 2017 @ 17:05
    Jawad Mian has the view that oil will trade at $65 dollar. His timeframe is 12-18 months. Raoul do you see the possibility that oil declines first to 30 and that by the end of 2018 oil sits at 65 dollar? I just asked Jawad the same question on twitter, will post when he replies. What do you think of his chart he published on the RealVision Publications killer charts? Thank you very much.
    • GM
      Gerald M.
      21 August 2017 @ 19:54
      In the same publication, Nautalis took a more bearish stance. Everyone has a view on directionality and time. You need to know why you have the view you do and then bet on that.
    • RP
      Raoul P. | Founder
      21 August 2017 @ 22:32
      I tend not to follows others forecasts or research. I just do my research and reach my own conclusions based on that.
  • DG
    Don G.
    21 August 2017 @ 15:20
    Thanks Raoul great analysis! Maybe something like DRIP?

Mark Yusko

Morgan Creek Capital Management, Co- Founder, CEO, & CIO

Mark Yusko is the Founder, CEO and Chief Investment Officer of Morgan Creek Capital Management. He is also the Managing Partner of Morgan Creek Digital Assets.

Morgan Creek Capital Management was founded in 2004 and currently manages close to $2 billion in discretionary and non-discretionary assets. Prior to founding Morgan Creek, Mr. Yusko was CIO and Founder of UNC Management Company (UNCMC), the Endowment investment office for the University of North Carolina at Chapel Hill. Before that, he was Senior Investment Director for the University of Notre Dame Investment Office. Mr. Yusko has been at the forefront of institutional investing throughout his career. An early investor in alternative asset classes at Notre Dame, he brought the Endowment Model of investing to UNC, which contributed to significant performance gains for the Endowment. The Endowment Model is the cornerstone philosophy of Morgan Creek, as is the mandate to Invest in Innovation.

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SkyBridge Capital, Founder & Co-Managing Partner

Prior to founding SkyBridge in 2005, Scaramucci co-founded investment partnership Oscar Capital Management, which was sold to Neuberger Berman, LLC in 2001. Earlier, he was a vice president in Private Wealth Management at Goldman Sachs & Co. In 2016, Scaramucci was ranked #85 in Worth Magazine’sPower 100: The 100 Most Powerful People in Global Finance. In 2011, he received Ernst & Young’s “Entrepreneur of the Year –New York” Award in the Financial Services category. Anthony is amember of the Council on Foreign Relations (CFR), vice chair of the Kennedy Center Corporate Fund Board, a board member of both The Brain Tumor Foundation and Business Executives for National Security (BENS), and a Trustee of the United States Olympic & Paralympic Foundation. He was a member of the New York City Financial Services Advisory Committee from 2007 to 2012. In November 2016, he was named to President-Elect Trump’s 16-person Presidential Transition Team Executive Committee. In June 2017, he wasnamed the Chief Strategy Officer of the EXIM Bank. He served as the White House Communications Director for a period in July 2017. Scaramucci, a native of Long Island, New York, holds a Bachelor of Arts degree in Economics from Tufts University and a Juris Doctor from Harvard Law School.

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Mr. Saylor attended the Massachusetts Institute of Technology, receiving an S.B. in Aeronautics and Astronautics and an S.B. in Science, Technology, and Society.

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Nugget's News, Founder & CEO

Alex Saunders is the founder and CEO of Nugget’s News, a digital media company focused on all things crypto. Alex has been captivated by cryptocurrency since 2012 and in 2017 he began educating globally on the benefits of cryptocurrency and how to safely acquireit. Nugget’s News has been listed as a top-20 podcast by Business Insider, ShapeShift and Lifehacker and has over 120k YouTube subscribers with 9 million total views.Alex is also heavily focused on his cryptocurrency education platform Collective Shift which currently serves over 4,500 members. provides his unique perspectives by utilising his expertise in fundamental analysis, technical analysis and market sentiment. He is working towards his mission of making it easier for everyone to understand the financial world.

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TradeStation Crypto, Inc., Sr. Director of Product Strategy

James helped launch TradeStation Crypto’s offering which utilizes a true online brokerage model that self-directed investors and traders have come to expect for equities, futures, and foreign currency markets. He is a reputed crypto asset specialist and blockchain thought leader focused on helping people find innovative ways to participate in this space. He is active in the blockchain community with speaking engagements, TV appearances and mentoring. James has over 15 years of experience in the Fintech industry.

Raoul Pal

Real Vision, Co-Founder & CEO

Raoul Pal is the Co-Founder and CEO of Real Vision, the world’s pre-eminent financial media platform, which helps members understand the complex world of finance, business, and the global economy.

Real Vision members also have access to Real Vision Crypto, a cryptocurrency and digital assets video channel watched by over 80,000 people. In addition, Raoul has been publishing Global Macro Investor since January 2005 to provide original, high quality, quantifiable and easily readable research for the global macro investment community hedge funds, family offices, pension funds and sovereign wealth funds. It draws on his considerable 31 years of experience in advising hedge funds and managing a global macro hedge fund. Global Macro Investor has one of the very best, proven track records of any newsletter in the industry, producing extremely positive returns in eight out of the last twelve years.

He retired from managing client money at the age of 36 in 2004 and now lives in the tiny Caribbean island of Little Cayman in the Cayman Islands. Previously he co-managed the GLG Global Macro Fund in London for GLG Partners, one of the largest hedge fund groups in the world. Raoul moved to GLG from Goldman Sachs where he co-managed the hedge fund sales business in Equities and Equity Derivatives in Europe. In this role, Raoul established strong relationships with many of the world’s pre-eminent hedge funds, learning from their styles and experiences.

Other stop-off points on the way were NatWest Markets and HSBC, although he began his career by training traders in technical analysis.

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What Bitcoin Did, Journalist

Peter McCormack is a full time journalist/podcaster covering topics such as Freedom, Human Rights, Censorship and Bitcoin. Peter created and hosts the What Bitcoin Did Podcast, a twice-weekly Bitcoin podcast where he interviews experts in the world of Bitcoin development, privacy, investment and adoption. Launched in November of 2017, the podcast has grown to over 100 episodes with a guest list that is a testament to the diversity of knowledge and opinions that represent the broader Bitcoin community. Expanding his growing list of human interest recordings, documentaries and films Peter has recently launched the Defiance podcast and DefianceTV.

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22-year Wall Street veteran who has been active in bitcoin and blockchain since 2012. In 2018-20 she led the charge to make her native state of Wyoming an oasis for blockchain companies in the US, where she helped Wyoming enact 20 blockchain-enabling laws. From 2016-18 she jointly spearheaded a blockchain project for delivering market index data to Vanguard as chairman and president of Symbiont, an enterprise blockchain start-up. Caitlin ran Morgan Stanley’s pension solutions business (2007-2016), heldsenior roles at Credit Suisse (1997-2007) and began her career at Salomon Brothers (1994-1997). She is a graduate of Harvard Law School (JD, 1994), the Kennedy School of Government (MPP, 1994) and the University of Wyoming (BA, 1990).

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FFTT caters to institutions and sophisticated individuals by aggregating a wide variety of macroeconomic, thematic and sector trends in an unconventional manner to identify investable developing economic bottlenecks for his clients. Prior to founding FFTT, Luke was a founding partner of Cleveland Research Company, where he worked from 2006-14. At CRC, Luke worked in sales and edited CRC’s flagship weekly thematic research summary piece (“Straight from the Source”) for the firm’s clients. Prior to that, Luke was a partner at Midwest Research, where he worked in equity research and sales from 1996-2006. While in sales, Luke was a founding editor of Midwest’s widely-read weekly thematic summary (“Heard in the Midwest”) for the firm’s clients, in which he aggregated and combined proprietary research from Midwest with inputs from other sources.

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