“How To Make 500% From Oil’s Violent Rally”

“The Easy Way To Ride One Of The Most Profitable Bull Markets In History

“Don’t let oil’s current price fool you this time.

“Thanks to an already guaranteed shortage – just around the corner – these low prices won’t be around for long. ”

That’s the scenario of the new teaser from the Pure Asset Trader, a newsletter by Ian Cooper that specializes in energy and commodity trades — it’s a fairly price one, “on sale” for about $800 a year. (Used to be called Pure Energy Trader, under which name I wrote about some of their old Bakken oil teasers last year.)

And in the teaser for this newsletter, they tell us not only that oil is beginning another historic bull run (they use more words than that, of course), but that they’ve got an easy way for you to profit.

They rely heavily on the International Energy Agency’s World Energy Outlook and repeat it’s claims that there will be a “supply crunch” after 2010, and they jump on the IEA’s projection that the world will rely on Canada as the world’s largest energy producing country by next year. I haven’t read the report from last year (2009’s report won’t come out until the Fall), so we’ll take them at their word on that one.

The big claim, though, is that although the world may rely more on Canada and its oil sands, those oil sands projects have in many cases been delayed, postponed, or “slow tracked” thanks to the recent drop in oil prices — so if demand picks up quickly and that oil is needed, there will be a bottleneck as increasing demand hits decreasing supply.

“On the other hand, as oil started becoming “affordable” again – in the $30 range – it triggered an unstoppable chain of events that is guaranteed to drive the price of oil through the ceiling… and make investors like you filthy rich on the way.

“You see, thanks to prices becoming too low, many of Canada’s oil companies – resources that would supply crucially needed oil for the U.S. and rest of the world in a few months – couldn’t stay in business.

“And we need that oil, like a junkie needs his fix.

“In fact, the U.S. depends on AND imports more oil from Canada than from Saudi Arabia, Kuwait, Libya, and Iraq – combined.

“But one by one, we started finding major oil projects temporarily closing up shop. Drilling and refining stopped. Exploration and testing lost all capital. And their share prices ultimately plummeted.”

So that’s a long way of describing the basic phenomenon of supply and demand — when demand sinks, prices drop, and producers cut supply, which causes prices to rise, and the dance continues unless some equilibrium sets in for a while (all else being equal, of course). In the oil market, we get lots of outside interference with basic supply and demand price adjustments because marginal supply increases generally come either from the OPEC cartel nations (largely Saudi Arabia) who try to manipulate the price and whose reserves are generally not transparently reported, or from the Canadian tar sands and ultra deepwater projects that are only economically feasible at relatively high oil prices, like the Tupi field discovery offshore Brazil.

And as we saw last year, oil can certainly take big swings from time to time — throw in demand increases that seem huge from China and India, but which are very unpredictable in scope, and demand destruction in the US, the largest oil market, when gas prices climb too high, and you can see why oil traders often are hirsutically challenged … scratch your head in puzzlement often enough, and the hair just starts falling out.

So what’s the investment that Ian Cooper is touting for us now that can bring huge profits from the expected oil rally?

“Collect Twice The Gains Of NYMEX Oil Traders… with One Simple, Yet Little-known Play


“We know oil prices are about to skyrocket. We know they’re just around the corner. And we know that those slick traders playing NYMEX futures – guys who need hundreds of thousands of dollars just to get started – somehow always come out ahead.

“But here’s what you might not know…

“Very recently, we’ve uncovered a rare investment that could pay you gains just as astonishing as any jackpot oil resource company out there – but without the risk!

“Here’s how it works.

“You see, this special investment, which most investors know absolutely nothing about, doesn’t even follow oil producers or risky exploration companies… it strictly follows the physical oil market.

“And get this:

“Thanks to the unique nature of this investment, you can actually get paid double the gains that oil makes!”

OK, so the super-savvy among you will have already figured this out (and I know there are a number of you), but for the rest of us, this is almost certainly …

The ProShares Ultra DJ-AIG Crude Oil ETF (UCO)

This is one of those good ‘ol leveraged ETFs, and it tracks the Dow Jones-AIG Crude Oil subindex of commodities futures. That’s a long way of saying that it tracks the futures trading in crude oil on the NYMEX. I don’t know what the mechanics of the fund are (ie, if they just roll a basket of futures contracts from month to month, or if they pick and choose months into the future), but in practice it appears from the chart that this seems to pretty closely give you a doubling (that’s the “Ultra” part) of the much more widely known US Oil Fund ETF (USO). This fund is quite new, just launched at the very end of last year, so it remains to be seen how the performance will shake out, but the index it’s based on is about ten years old.

If you’re interested in making some leveraged commodity bets right now, oil is not the only one available in this family of ETFs — ProShares also launched similar funds for a commodity basket and for gold and silver last year, so you can see all of those on the ProShares website if you like. And yes, if you disagree with Cooper you can always make the opposite levered bet, both “Ultra” and “UltraShort” versions of these ETFs are available.

We’ve looked at many leveraged ETFs before, and many folks don’t understand their downfalls (the principal one being, they can be dangerously unpredictable in the long-term even if they do achieve their goal of tracking the index on a daily basis). You can read The Case Against Leveraged ETFs if you want a more detailed analysis of the concerns.

Doesn’t mean you have to avoid them, of course … just know that these are not long term bets on price movements that you can just “set and forget,” they’re really designed for — and mostly used by — very active traders and day traders. Most of them do have options chains available, too, so you could always do some double speculating in that way, or control your risks — options premiums on these tend to be high, so there’s plenty of fun to be had there.

So, whaddya think? Any interest in doubling down on crude oil in hopes that we’ll see it soar over $100 again? Or would you rather take a gander at Ultra ETFs for Gold or Silver, since we’ve seen a lot of hyped chatter about both of those, too? Or do you think they’re all crazy, and that a slowing economy will crush commodities? Something inbetween? Share your thoughts with a comment below.

And we haven’t yet had any reviews of Cooper’s Pure Asset Trader, but if you’ve ever subscribed (I think it’s fairly new, though it used to be called Pure Energy Trader), let us know what you thought by clicking here to submit a review. Thanks!

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7 Comments on "“How To Make 500% From Oil’s Violent Rally”"


May 27, 2009 1:15 pm
What about the strategy of shorting the opposite ETF of the one you like?…for example pick any two opposites, take FAS and FAZ. If you like FAS and wanted to invest in it, why not short FAZ instead? Doesn’t this strategy not only protect you from the costly decay we keep hearing about but actually help you benefit from it? Especially if you liked it as a long position…doesn’t it turn things around and make it a more favorable buy and hold? Anybody have any input on this? Am I just an ignorant newbie to the world of ETF’s or… Read more »
May 27, 2009 1:49 pm

another example of a guru that wants to get paid to tell you about something that is already common knowledge. and they never tell you about the downside. there is lots of free information about this kind of vehicle on Seeking Alpha.

Mark Bohana
Mark Bohana
May 27, 2009 6:58 pm

As an FYI, if you plan to trade or hold USO, than look at a tax deferred account (IRA, Roth, etc.) instead of regular brokerage account. USO is a limited partnership, consequently you will get a K1 and need to establish basis for schedule D. To those of us that are used to doing ltd partnerships, it isn’t a big deal but for those non initiated or going to tax service, the expenses and time could be a problem.

Gravity Switch
May 27, 2009 2:18 pm

Fun stuff, eh? He’s not the first to lay claim to “top secret” ETFs — back in September Martin Weiss was taking ownership of all of ProShares short products, saying he had a “comprehensive list” of these special products for his subscribers. Of course, at the time ProShares was offering … you guessed it, exactly 38 inverse ETFs — and certainly not trying to keep any of them secret.


May 27, 2009 2:35 pm
I think what i’d probably do is take a percentage of what i’d invest and buy the Jan 2010 expiry $10 call (it’s trading for $2.93 a contract) and keep the rest on the sidelines in cash so the amount i have invested IS my stop. ie if i would normally put $10,000 into a position then i might buy $1500 or $2000 worth of contracts. That way if their wrong… the most i can lose is my $1500 (no worries if the ETF gaps down), but I have an unlimited upside for the next 8 months if oil goes… Read more »
May 27, 2009 11:07 pm

To be talking about decay you must be talking options. To have time decay on your side you have to sell options. Which is limited upside and perhaps unlimited losses. unless you do it with CFDs but aren’t they illegal in the USA?
Or have I missed the point?

Jay Cornelius
Jay Cornelius
May 31, 2009 8:24 am
re: “shorting the opposite ETF of the one you like?…for example pick any two opposites, take FAS and FAZ. If you like FAS and wanted to invest in it, why not short FAZ instead” This is a good idea in theory, especially since these ETFs have an expense ratio cost that helps to benefit your short position. HOWEVER – my broker never seems to make ANY ultra ETF available for shorting. Anything that is double-long, double-short, triple-long or triple-short always shows as “Zero Shares Available” for shorting. Is any one of you having success at finding shares of these to… Read more »