Oil - You Can Bet On It!
You can bet on oil. Do you think it is going up? going down? volatile prices? stable prices? something else? You can bet on it!
Let's imagine that oil is right now $130 per barrel.
Do you think it will go up, down, the same, what? In how much time do you think it will happen?
If you feel strongly about it, you can bet on it.
One way to bet on oil is to "go short". This would be saying that you think the price will go down; not just a little bit, but enough to make it worth the risk to put a bunch of money on the line.
The other main way to bet on oil is to "go long". This is for those that are fairly sure that oil is going to get MORE expensive.
Both of these are speculation. They are speculating that the price will do something, and betting lots of money on that.
For every "short" there is always a matching "long" because the two are paired up and are really betting against each other. It's like gambling against one other person, and the money just moving back and forth as the wins go one way and then the other.
Short or Long at $145
Some of the oil futures are as high as $145.
The "short", in this case, was betting lots of money that oil would get cheaper. In fact, for every contract they went short on at $145, that is now selling for $130, they made $15 times 1,000 barrels for a total of $15,000. Wow! Nice. Their account is now looking real nice.
The "long" in this sale is not all that happy. Not only did they have to deposit $12,000 to go long (as did the "short"), but they also now have had to add another $12,000 or so. They are checking their funds to figure out, "how low can it go before I have to sell?" They are also trying to desperately find out what it is likely to do in the future. If it is going to go down another $10, then they could sell now, and buy when it gets down that $10.
There are those "longs" that are sticking with it anyway. Perhaps they have lots of money, and don't care or pay attention to "little" drops like $15. The psychology is different depending on a number of such factors.
In at $100
There are those who bet long or short at the $100 mark. The "shorts" bet it would go down. The "longs" bet it would go up.
The "shorts" right now had to first put in the $12,000 for one position, and then another $42,000 or so as the price was going up to $145. They are really freaked out, and perhaps getting very concerned, that the price will never come back down to $100. They could lose an unlimited amount of money because there is no limit to how high the price could go. Thank goodness, they are thinking, that the price dropped to $130, because that frees up $15,000 in cash that they can use for something else, or at least providing them a cushion. They may be considering getting out now so that they cut their losses.
The "longs" in at $100 are really happy right now. Their account was up by $45,000 per position for a while, and it is still up $30,000 now. They are wondering if they should sell now, or wait for it to go back up.
In both cases, there is a lot of wondering if they should sell. If a bunch of shorts and longs both try to get out, for the opposite reasons, then the price will come down, which will be an added incentive for the longs to get out and for the shorts to stay in.
In at The Money
There were those who went short or long right at the current price. They were convinced that the price would go up, or down. In fact, the same number of positions (short) thought it was going down as those (long) that thought it was going up. If the price goes up, the longs are happy, because they get money from the shorts. If the price goes down, the shorts are happy, as they collect money from the longs.
The major point of all of this is that there are those betting that the price will go up, and an equal amount of positions betting that it will go down. Also, the reason that there would be those selling or buying are on both sides. But, again, the major point is that they are all speculating that the price will go a certain way, and there are an equal number of positions on each side.
Let's imagine that oil is right now $130 per barrel.
Do you think it will go up, down, the same, what? In how much time do you think it will happen?
If you feel strongly about it, you can bet on it.
One way to bet on oil is to "go short". This would be saying that you think the price will go down; not just a little bit, but enough to make it worth the risk to put a bunch of money on the line.
The other main way to bet on oil is to "go long". This is for those that are fairly sure that oil is going to get MORE expensive.
Both of these are speculation. They are speculating that the price will do something, and betting lots of money on that.
For every "short" there is always a matching "long" because the two are paired up and are really betting against each other. It's like gambling against one other person, and the money just moving back and forth as the wins go one way and then the other.
Short or Long at $145
Some of the oil futures are as high as $145.
The "short", in this case, was betting lots of money that oil would get cheaper. In fact, for every contract they went short on at $145, that is now selling for $130, they made $15 times 1,000 barrels for a total of $15,000. Wow! Nice. Their account is now looking real nice.
The "long" in this sale is not all that happy. Not only did they have to deposit $12,000 to go long (as did the "short"), but they also now have had to add another $12,000 or so. They are checking their funds to figure out, "how low can it go before I have to sell?" They are also trying to desperately find out what it is likely to do in the future. If it is going to go down another $10, then they could sell now, and buy when it gets down that $10.
There are those "longs" that are sticking with it anyway. Perhaps they have lots of money, and don't care or pay attention to "little" drops like $15. The psychology is different depending on a number of such factors.
In at $100
There are those who bet long or short at the $100 mark. The "shorts" bet it would go down. The "longs" bet it would go up.
The "shorts" right now had to first put in the $12,000 for one position, and then another $42,000 or so as the price was going up to $145. They are really freaked out, and perhaps getting very concerned, that the price will never come back down to $100. They could lose an unlimited amount of money because there is no limit to how high the price could go. Thank goodness, they are thinking, that the price dropped to $130, because that frees up $15,000 in cash that they can use for something else, or at least providing them a cushion. They may be considering getting out now so that they cut their losses.
The "longs" in at $100 are really happy right now. Their account was up by $45,000 per position for a while, and it is still up $30,000 now. They are wondering if they should sell now, or wait for it to go back up.
In both cases, there is a lot of wondering if they should sell. If a bunch of shorts and longs both try to get out, for the opposite reasons, then the price will come down, which will be an added incentive for the longs to get out and for the shorts to stay in.
In at The Money
There were those who went short or long right at the current price. They were convinced that the price would go up, or down. In fact, the same number of positions (short) thought it was going down as those (long) that thought it was going up. If the price goes up, the longs are happy, because they get money from the shorts. If the price goes down, the shorts are happy, as they collect money from the longs.
The major point of all of this is that there are those betting that the price will go up, and an equal amount of positions betting that it will go down. Also, the reason that there would be those selling or buying are on both sides. But, again, the major point is that they are all speculating that the price will go a certain way, and there are an equal number of positions on each side.