Wall Street Manna

An irreverent look at Wall Street

Friday, February 20, 2009

An oil play for oil bulls

The PowerShares double crude short play (DTO) closed at 231 after trading as high as 246 today.

The double shorts ETF's work, until the underlying assets start to show a bid, and then they drastically underperform.

The play then, is too SHORT this number if you like crude at these levels.

Look at the prices of the financials today. They have been obliterated. The financials, collectively are way lower than at any other time in this bear market. How about the price of the Ultra Short Financials SKF? It closed today at 188. Last time the financials broke, and when they were at much higher levels, SKF was at 303!

Look at the real estate stocks. They have been crushed also. How about the Ultra Short Real Estate (URS) that closed at 72 today. Where was this number the last time we were down, even though now we are at much lower levels? It was at 295!

So now that we have finally gotten a lower contango in oil, you can now SHORT the bearish ETF DTO that tracks crude, and that gives investors double the short return on oil!

When the trend gets choppy, these short ETF's are designed NOT to work. Look at what happened to SKF and URS!

So if you like oil at these levels, and with the flattening of the contango, you short the ETF that makes money when crude drops.

And just like the bearish financial ETF that didn't work, and just like the bearish real estate ETF that didn't work, you now have a bearish crude ETF that now won't work.

Especially now that it has already run in anyone that had shorted it.

So only the professionals are left to play in this playground!

Join them!

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