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HarryCaraysGhost (99.71)

A simple hedge.

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March 05, 2011 – Comments (15) | RELATED TICKERS: UGA

Ok, if your like most people your probably bitching about the cost of gasoline right now. Wah! it's almost at four dollars.

But my question is why did'nt you hedge when gas prices were low. We all know the price of gas wildly fluctuates. Sometimes seasonal sometimes political.

I know it's difficult to store two hundred gallon drums of gas bought at $2 or under so I propose a different plan-

http://finance.yahoo.com/q?s=uga

Buy this when gas is low, sell when it's high. Pretty simple right.

rinse, wash, repeat.

(you may wonder why I'm posting this now when gas prices are high, simple I don't need a crowded trade. The people that remember this the next time opportunity arises deserve the profits)

Rock on.

 

15 Comments – Post Your Own

#1) On March 05, 2011 at 8:28 PM, blesto (31.59) wrote:

OK

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#2) On March 06, 2011 at 10:14 AM, HarryCaraysGhost (99.71) wrote:

I've always wondered if there was a way to hedge gas prices and this is the purest play that I could find.

One fun thing I do is check the price of gas at the same gas station I pass every day on my way to work, and see how it correlates to UGA. Its not a perfect system but pretty darn close.

I've done this twice now, and never worry about the price of gas, just remember this is not an investment just a simple hedge.

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#3) On March 06, 2011 at 10:43 AM, Valyooo (99.57) wrote:

You actually found a non broken oil play?  You da man, I had never seen this one, thanks ghost man.

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#4) On March 06, 2011 at 10:44 AM, Valyooo (99.57) wrote:

BTW, how do you add a pitch to something you have already picked that you didn't write a pithc for?

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#5) On March 06, 2011 at 12:19 PM, HarryCaraysGhost (99.71) wrote:

@ valyooo

Just click on the add bar. Sometimes I'll wait a month or so to add a pitch. Or green checkmark for that matter.

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#6) On March 06, 2011 at 12:21 PM, devoish (97.60) wrote:

Valyoo,

In the pitch column on your scorecard there is either a link to your pitch, or the word "add".

HarryCarysghost,

If you are like "most people" you spent every penny you made on things you needed today, with nothing left over for hedging.  Possibly you spoke up for a 30mpg fuel economy standard.  Possibly you bought a more fuel efficient car when you needed a new one.

Which is just as well, because everyone using an ETF to hedge gasoline prices that is not intending to take delivery of the gasoline, have merely inserted themselves as a midde man between suppliers and retailers driving prices up without adding value.

Best Wishes,

Steven

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#7) On March 06, 2011 at 1:56 PM, HarryCaraysGhost (99.71) wrote:

Steven,

Actually I'm quite disciplined in my gas hedgeing. If you break from the plan it does'nt work.

Simply create a separate prepaid debit card issued by Visa. And only use that for gas purchases. The amount of gasoline I consume is very limited. Going to work, stopping at stores. My gas bill is normally $20 pr/wk. When the price spikes up it's $25 a week.

So I sought a way to keep it at a constant $20 (or lower). And this works for me.

Now I can see that your trying to open up a whole can of worms about the social ramifications of energy consumption and speculation of oil prices. I refuse to take the bait. The amounts I'm dealing with are miniscule. Hopefully no heavy hitters are reading this ; )

My investment goal for 2011 is to keep things simple and this is as simple as it gets.

All the best,

John. 

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#8) On March 06, 2011 at 6:50 PM, devoish (97.60) wrote:

Sorry, I thought you were talking about buying an etf.

Buying a pre-paid visa card may look simpler and less costly than it is. At my gas station the price of swiping is $.10 per gallon. i think visa charges a $9.95 fee to open a pre-paid card, additional fees to reload it, and $.95 each time you call them if you have problems.

Somehow I suspect that isn't the end of it, but you may have found the most costly way to buy gas possible.

Plus I am not sure how buying a $500. pre paid visa card in January when gas is $3.00/gal saves you any money when you use it to buy gas 6 months later at $3.69?

Am I misunderstanding something?

Steven

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#9) On March 06, 2011 at 7:32 PM, HarryCaraysGhost (99.71) wrote:

Forgive me for misspeaking (or mistyping as the case may be)

I should have said debit card. The prepaid part slipped in since you use the profits from trading UGA to fund your gas purchases.

So to me it's prepaid, I'm sorry for the confusion.

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#10) On March 06, 2011 at 7:59 PM, HarryCaraysGhost (99.71) wrote:

Wow, I never looked into prepaid debit cards until today.

Yikes. That is costly.

Damn Mastercard, tryin to keep a good man down... ; )

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#11) On March 06, 2011 at 8:12 PM, devoish (97.60) wrote:

Ok,

Now you made me smile. I'll leave any discussion of the unintended consequences of etf trading on gas prices for another day/blog, whatever. I'll keep tonight simple, right along with you. http://beeradvocate.com/beer/profile/435/45308 

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#12) On March 09, 2011 at 9:39 AM, checklist34 (99.73) wrote:

this is one of the most interesting ideas (hedging ones personal life) that I have ever read in a blog, and I want to expand on it in my 2nd to next blog if I may. 

I'll give credit where credit is due.  

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#13) On March 09, 2011 at 12:27 PM, leohaas (32.73) wrote:

As with every hedge, the results strongly depend on your timing. In hindsight, of course it was obvious that hegding was a good idea when gas was $2. Today, it is $3.50. My question to you: are you buying USG today, expecting that gas prices go up? Or are you not buying USG today, expecting that gas prices will not go up?

All we can do today is hedge at today's price. The risk is that you are hedging at the wrong time. Ask Gray Davis...

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#14) On March 09, 2011 at 9:05 PM, GreenCollegeGrad (78.81) wrote:

Newfound respect ghost man. Ur not just good to have witty banter with. Grats on a unique idea

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#15) On March 10, 2011 at 9:46 PM, HarryCaraysGhost (99.71) wrote:

 checklist34Yeah man, I would be honored. Cris Grailey wrote some great blogs about investing in utilities to pay your monthly bills, I'm striving to get to that point.

leohaas - The hedge is over for me at this point. Will UGA continue to go up, I dunno. Like I said I'm keeping it simple. Just monitoring the price of gas. Buy low, Sell high.

GreenCollegeGrad- Thanks man, yeah every once in awhile this beer drinking football fan with no formal financial training is on to something.

Hmmm... Buying stocks at the 08-09 lows comes to mind ; )

Cheers.

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