3:56 pm (Hawaii) There was a window of about 10 minutes when I contemplated whether to unload today's positions in AGQ and UCO. AGQ was up to about 214 in the final hour or so, I forget. But it was doing a lot better after I waited it out. I bought it at 209.81 and it treaded below that level for at least two hours while I grumbled at my bad choice of entry point. But it was up for me late in the day, so good.
Then there was UCO, which I bought 20 minutes before the closing bell at 51.40. It went right to 51.50, then 51.60 and higher. I felt all right, even though both UCO and AGQ had run hugely already. So, which I whined a little about Scottsdale Silver stackers and bars getting price increases, sometime along the way, CME raised crude oil margin requirements by 25%. Same shit that they did to Spot Silver.
How did I not see this coming? For whatever reason — ignorance, stupidity, take your pick — I never thought of UCO as something that would be manipulated like silver. But there it was. I didn't even know until Kudlow brought it up more than two hours after the bell. All I knew was that the price action in UCO was lame and declining after hours. The margin hike explained everything.
So I held my position, for better or worse. It could be ugly tomorrow for crude and my fairly sizable position (by my meager standards). Who knows? Maybe CME will give it the ol' extra effort and hand silver another margin hike. Then I'd be wishing I stayed in fiat 100%. For now, I'll hold UCO and possibly unload on any decent surge close to my entry price, but I'm not expecting much.
All I had to do was empty my positions before the bell and I would've had a decent profit for just a few hours of "work". It would've easily offset my small losses from the early-morning trades in AGQ. I would've even been better off ignoring the market to 1) sleep, or 2) shop for more physical metal.
Moving on ... now that I think about it, I should've opened a small position in a crude bear ETF/ETN. Here are four of them: DTO (double short), SZO, SCO (ultra short) and DNO. Based on today's afterhours action, looks like SCO is the most liquid, moving up roughly 1 buck before closing at 43.51. Okay, I feel a little better. If crude sucks badly in the morning, SCO it is.
Update 4:26 pm (Hawaii) It just makes too much sense. I should've been riding crude oil up and down since February. I always wanted to play gas prices and milk the situation instead of griping about the rising cost for a gallon of it. But now that it's coming down, I'm ready to use SCO to short crude. Timing will be a challenge, but it's a logical hedge to my UCO position. Wish I'd thought of it much sooner.
CNBC: CME hikes crude oil margins by 25% (May 9 2011)
Update 10:35 pm (Hawaii) There are theories out there, all right. One is that as Spot Silver's crash last week took crude oil down, so it shall be now that crude oil is under pressure due to margin requirement baloney by CME. That could be true when the U.S. market opens. For now, crude oil has cut its earlier loss in half and is down less than 1% (80¢) to 101.81/barrel.
Spot Silver? Seems to be doing just fine at 38.16, climbing up as Hong Kong enters its final two hours of the session. I'm very interested to see what happens when gold futures start trading in Hong Kong on May 18. Could be a chance for Asia to really seize control of price. Or maybe it'll be much ado about nothing. I'm guessing it'll be the former.
Spot Gold? 1514.00 and climbing. I'm not feeling so bad about my positions right now, but it's a long way until the opening bell.
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