Oil Gamble
Many people don’t like to associate investing with gambling, and for good reason too. Investments do come with risk, but it’s not guesswork. There are many signs that an asset will rise or fall in the future, and with good judgement you have a much better chance of getting a return on your capital. Some investments are riskier than others, but you can gamble in the investing game, and we’ve seen it happen. I hate to say it, but meme stocks are often gambles as they are near-bankrupt businesses with almost no fundamental value. Small altcoins are oftentimes a gamble too, and scams even, so gambling does exist in the finance world. However, it looks like we could add commodities to that list, too.
As we discussed last week, oil prices have been on a tear lately, reaching about 82 dollars per barrel, which hasn’t been seen since 2014. This run has come with some wild bets that could go on WallStreetBets, which seems weird. Usually, buying a commodity like gold isn’t a gamble if you believe the value will increase, but options are a different game. If it doesn’t reach the price on your contract, you will lose all the money you put into it, making it a very volatile asset. Currently, traders are piling into bets that oil will hit 100 dollars per barrel, and even 200 dollars per barrel. To put this in perspective, crude oil hasn’t hit 100 dollars since 2014, which makes these bets crazy. There has been a record number of call options traded, reaching levels of March 2020, with the target price of 95 dollars and 180 dollars being the most popular. JPMorgan analysts believe that it will stabilize around this area for the rest of the year, but people believe that if the supply chain disruptions continue to cause a negative effect, oil could go higher. It’s another case of high risk, high reward, and with how wild the markets have become we can’t throw this gamble to the side. What do you think about these bets?
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.
