Lock in Today's Low Gas Prices - Here's How

[lencap]

I take no responsibility for your investments, I'm just describing a strategy that may or may not work for you. Discuss it with your investment advisor if you think it may be useful for you.

If you want to lock in today's low gas prices you can buy an "exchange traded fund", commonly called and ETF, that has its price directly tied to the price of gasoline. If the price of gas falls, the ETF will fall, and if it rises it will rise as well.

If you think prices can continue to fall, don't do anything now. When you think the prices are close to the bottom, or want to buy some current gas prices now to protect yourself in the future, the security you want to buy has the ticker symbol: UGA.

UGA is the ETF that is pegged to the price of gasoline. You can buy it through any brokerage firm and the commission will be the same as for any other stock. You can learn more about it at Yahoo in the "Finance" section. When you get there enter the ticker: "UGA" and the information will be listed. There are many other sources as well for ETFs, use Google or any other search engine you like.

The price of UGA closed today near $19 a share, down from almost $68 at the peak. The price of UGA isn't directly comparable to the price of a gallon of gas, but it moves proportionally to it. So at $19 currently it is trading near the equivalent of $1.15 a gallon of gas (that's raw gas price, no transportation, no state and federal taxes). If gas goes back to $4.20 a gallon, the price of the ETF will rise to $65 or so.

So if you burn 1,000 gallons a year, and think gas can rise $3 a gallon in the next few years, your gas costs will rise by $3,000. To offset that potential extra cost buy about 700 shares of UGA and lock in today's price. If gas rises to $4+, UGA will rise to $60 or so, a $40 gain per share, $2,800 on your 700 share purchase. Adjust the amount you buy to match your driving mileage.

Keep in mind, if the price of gas continues to fall, the price of UGA will fall as well. So you may want to buy some now and some later. Either way, it's a great way to offset rising fuel prices in the future.

 

[CL65 Captain]

United Airlines lost $500 million hedging their fuel last quarter. They hedged at $140/barrel. Delta is hedged at $90.

Interesting way for consumers to hedge their gas. Thanks.

 

[tosugrad]

I like USO better.

 

[tosugrad]

If gas rises to $4+, UGA will rise to $60 or so, a $40 gain per share, $2,800 on your 700 share purchase.

Actually its a BIT more than that :biggrin:

Like $25,000+ more!!!

 

[nsxsupra]

I have positions in USO at $33.68, $32.68

DXO at $2.60

Oil at $22.98

I don't like UGA due to the low volume, liquidity may be a concern if price ever go back up, very few buyers.

38 million USO shares traded today vs just 69,000 shares of UGA. Looking at level II, the UGA bid/ask spreads are wide.

The price of crude just keeps on falling. I am a little worried due to heavy positions for the short term. I will buy more if crude oil falls below $30. If Crude ever get back to $65 per barrel, these 3 positions alone will buy me a GTR.

 

[steveo5000]

how do you buy crude oil?

 

[warren1205]

you need to research a broker. they sell at different prices.

 

[steveny]

I like USO better.

Me too. and I wish I had used it to hedge fuel for my business as we got blown out of the water with fuel costs this summer. I am still pissed about it as it was a major lack of foresight on my part.

Those friggen 2500 Chevy trucks suck gas like crazy.

 

[steveny]

I have positions in USO at $33.68, $32.68

DXO at $2.60

Oil at $22.98

I don't like UGA due to the low volume, liquidity may be a concern if price ever go back up, very few buyers.

38 million USO shares traded today vs just 69,000 shares of UGA. Looking at level II, the UGA bid/ask spreads are wide.

The price of crude just keeps on falling. I am a little worried due to heavy positions for the short term. I will buy more if crude oil falls below $30. If Crude ever get back to $65 per barrel, these 3 positions alone will buy me a GTR.

Why don't you post more in the sock market thread? I think oil will over shoot to the downside pretty soon. Waiting to go long now.

 

[jond]

Oil is only down to historic norms now. I would think it's going closer to $20 and then will stabalize around $35-35 for 10-15 years.

The reason it went up in price had nothing to do with supply/demand which I think most people make the assumption.

 

[sahtt]

It's always supply and demand. The hard part is figuring out what that centers around. More often than not it's the supply and demand for money flowing into a certain sector. People don't bring that one up too often.

The hedging thing isn't a bad idea but it's not so simple.

Let's say gas goes up so you sell some of your "hedge". To do it perfectly you'd have to sell some of your hedge every time you buy gas, in proportion to whatever you paid "extra". Otherwise you risk gas spiking but never selling your hedge in anticipation it might "keep going up". Then gas prices start going back down so you quickly sell some of your hedge trying to get a little use out of it. Then the next week gas goes up again. Now what? And right or wrong, you paid 5-10$ commission each time you sold.

Besides that, you are going to have 2-3k probably yielding no interest for years. That's a couple hundred bucks pretty quickly.

 

[steveny]

It's always supply and demand. The hard part is figuring out what that centers around. More often than not it's the supply and demand for money flowing into a certain sector. People don't bring that one up too often.

The hedging thing isn't a bad idea but it's not so simple.

Let's say gas goes up so you sell some of your "hedge". To do it perfectly you'd have to sell some of your hedge every time you buy gas, in proportion to whatever you paid "extra". Otherwise you risk gas spiking but never selling your hedge in anticipation it might "keep going up". Then gas prices start going back down so you quickly sell some of your hedge trying to get a little use out of it. Then the next week gas goes up again. Now what? And right or wrong, you paid 5-10$ commission each time you sold.

Besides that, you are going to have 2-3k probably yielding no interest for years. That's a couple hundred bucks pretty quickly.

exactly what I was thinking when it comes to the commisions. If there were any commisions I would buy 10,000 "gallons" right now and sell it off as we used it.

 

[nsxsupra]

Why don't you post more in the sock market thread? I think oil will over shoot to the downside pretty soon. Waiting to go long now.

Steve,

I have been really busy lately working and waking up daily at 4am to participate in pre-market trading and absorbing information. It is also too time consuming to post and I don't want to give an impression that I am cocky when I am actually really humble in real life.

We can't predict the future, but I will put my money where my mouth is. I can afford to lose money because I have steady income even if I don't participate in market, but I will never ever forgive myself for missing out of opportunity. I hate the words such as "I wish".

I made the entry with a mind set that crude oil could dip lower, the key word here is "could". The entry point is also a starting point, If it does dip below $30 I will be adding position with conviction. If it gets to $25 and below, it would be interesting to see how sustainable that is. I think your guess is as good as my.

It could have really quick 50~100% up side. Again the key word is "could", nothing is definite. The contract for Janurary delivery just expired, the February delivery contract is trading at $43.25, up 1.30%. Today's low was $40.90. Even in small allocations, I don't trade smaller then $3k per order, so comission is absolutely the last thing on my mind and has zero effect.

You have been participating actively so you know the velocity going down can be intense and the velocity up can be equality as intense. Despite the negative general sentiment from people on the sidelines towards investors. There are hundreds of stocks has already gain over 100% in matter of days since November 21st lows. In a bear market people can still make a ton of money.

The market will always react way ahead of recovery. I don't have millions of cash to invest and chase the bull once once the market already recovered 20~30% from its lows, but I want at least a million in gains, anything less will be a huge let down for me, so in order to do so, I must constantly be quick, active, and reposition so I can get absolute most velocity for my capital. December has been absolutely awesome, but I don't think it is sustainable or will it. January will be very interesting.

 

[steveny]

Steve,

I have been really busy lately working and waking up daily at 4am to participate in pre-market trading and absorbing information. It is also too time consuming to post and I don't want to give an impression that I am cocky when I am actually really humble in real life.

We can't predict the future, but I will put my money where my mouth is. I can afford to lose money because I have steady income even if I don't participate in market, but I will never ever forgive myself for missing out of opportunity. I hate the words such as "I wish".

I made the entry with a mind set that crude oil could dip lower, the key word here is "could". The entry point is also a starting point, If it does dip below $30 I will be adding position with conviction. If it gets to $25 and below, it would be interesting to see how sustainable that is. I think your guess is as good as my.

It could have really quick 50~100% up side. Again the key word is "could", nothing is definite. The contract for Janurary delivery just expired, the February delivery contract is trading at $43.25, up 1.30%. Today's low was $40.90. Even in small allocations, I don't trade smaller then $3k per order, so comission is absolutely the last thing on my mind and has zero effect.

You have been participating actively so you know the velocity going down can be intense and the velocity up can be equality as intense. Despite the negative general sentiment from people on the sidelines towards investors. There are hundreds of stocks has already gain over 100% in matter of days since November 21st lows. In a bear market people can still make a ton of money.

The market will always react way ahead of recovery. I don't have millions of cash to invest and chase the bull once once the market already recovered 20~30% from its lows, but I want at least a million in gains, anything less will be a huge let down for me, so in order to do so, I must constantly be quick, active, and reposition so I can get absolute most velocity for my capital. December has been absolutely awesome, but I don't think it is sustainable or will it. January will be very interesting.

I feel we are going to get an Obama rally and then it's going to implode.

 

[Vega$ NSX]

Here's the best way to lock in today's gas prices. Buy several 55 gallon drums. Fill with gas at local station. Store in garage.

 

[sahtt]

Here's the best way to lock in today's gas prices. Buy several 55 gallon drums. Fill with gas at local station. Store in garage.

Make sure you buy some stablizer when you buy your drums. Oh and make sure you don't have a fire in your garage.

 

[steveny]

Here's the best way to lock in today's gas prices. Buy several 55 gallon drums. Fill with gas at local station. Store in garage.

I don't think that is legal without the proper permits.

A friend of mine had a gas pump at his parents house when we were younger. It was a PITA to comply to store the fuel so they just stopped storing it. It was grat for them though as they got gas a lot cheaper than at the gas station.

 

[nsxsupra]

I feel we are going to get an Obama rally and then it's going to implode.

lol, I don't mind the Obama rally, but forget the implosion part. We already had an implosion this year. Let hope Obama is as good as his basketball skills, we don't have other choices anyway:

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I have been wishing for a day like today all month long to add additional positions, but when it finally arrives, it felt so cloudy and uncertain, not there yet, just a little bit more. The contraction on ANR, BTU, WLT, and MEE in such short period of time is just incredible.

The DXO and USO were trading at very narrow range all day today, mice was on the wrong spot so it is not reflecting the correct date. They are very freezing cold during the after hours.

 

[OL'BILL]

Maybe i'm wrong but how long do you really think that OPEC is going to keep loosing money? Gas prices are headed up as we speak and look for at least a 20-25% increase by or shortly after the New Year.
Just my $0.02
B.