Kent Moors’ “Trade Just Hit Green Light Status”

It’s been a busy few days in teaserdom, but I think this one edges out most of the others when it comes to the urgent questions we’re getting from readers — Dr. Kent Moors publishes a pricey energy trading newsletter called Energy Inner Circle, and he’s telling potential subscribers that a trade which can make five to ten times your money in sixty days just hit a “green light” — and that now is the best time in seven years to make this trade.

So what is it? We’ll sift through the clues and try to get you some answers. And no, I’m not going to make any promises about your $1,000 turning into $96,365 in two months… but I also won’t charge you $1,950 for the info, all I’ll ask for is a bit of your time as we work through the clues.

Here’s what got everyone antsy:

“After 7 years, the final piece of the puzzle fell into place for a trade that can hand you 5 times your money in the next 60 days…

“In fact, the last time oil prices were as volatile as they are today, this trade turned $10,000 into $300,556, over 30 times your money. And that payoff was triggered by an event that we just saw again for the first time since 2008.

“Now I can’t promise you’ll make 30 times your money this time around. That’s an exceptional case, no doubt. But even a fraction of those profits could change your life.

“Long story short, now is the best time in seven years to enter this trade.

“And it costs next to nothing to get started. You can be in this trade today for as little as $116, but you can go as big as you want.”

So… what is it? A few clues…

“Just to be clear, oil makes this trade possible, but it’s NOT an oil investment.

“It’s not stocks, bonds, or anything long-term.

“It’s not an investment, period.

“It’s a TRADE. A short-term way to make 9.6 times your money – or more – without buying a drop of oil….

“It works the same whether oil swings up or down. You see, the trade covers both sides. So as long as the price moves, as I believe it will, you can make a killing.

“You never see average investors trading this way, because they don’t know how. But traders at Goldman Sachs, Morgan Stanley and Deutsche Bank do it all the time.”

Sounds interesting, right? Well, if he’s talking about huge returns like this in the space of a couple months then he’s almost certainly talking about options, either equity options or futures options — and since he’s pitching this to ordinary investors, most of whom wouldn’t have the slightest idea how to trade futures options (or any interest in doing so), I’ll be he’s pitching options on one of the many stocks or ETFs that’s driven by oil prices.

Which one? Here are a few more clues:

“Now, one thing you should know is that the trade I’m talking about only works with one specific security. It was issued by a Delaware Limited Partnership in 2006 and is now run by two Berkeley grads out of a small office in Oakland, California.

“The good news is that it is extremely liquid.

“So it’s easy to move in and move out.

“But best of all, it gives you a real chance to turn $10,000 into $96,635 or more in the next 60 days.”

And he reiterates that bit about being a trade you can make both ways…

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“To make this kind of money in a REGULAR trade, you’d have to bet on which way crude prices are heading.

“Not THIS one.

“If oil shoots UP it can make you nine times your money… while if the price takes another hit, it can make you five times your money.”

So what’s the investment? Well, the “one specific security” he’s talking about is almost certainly the United States Oil Fund (USO), which is a publicly traded partnership that investors have used to track the short-term movements of the price of oil since it was launched in 2006. And yes, it’s managed by a couple guys who are Berkeley grads, and the company they work for, the General Partner, is United States Commodity Funds, which does indeed have its offices in Oakland (no surprise, then, that they hire finance types and economists from UC Berkeley, which is just a few miles from downtown Oakland).

But that’s neither here nor there — what Moors must be advising here is a trade in short-term options on USO. USO has very liquid options compared to most stocks and ETFs, so it’s fairly easy to make these kinds of trades at decent prices as long as you’re not betting huge amounts of money — and USO is also a terrible long-term investment except at times when oil prices are going relentlessly upward, so it makes sense that you’d consider trading options a couple months out rather than trading the shares themselves.

What makes USO a terrible long-term investment is that their whole reason for being is to buy and own near-term oil futures — but futures are generally priced at a small premium (like options) to the current price, so it would cost you a bit more to buy oil for July delivery than for June delivery right now. That premium, absent a big move in the underlying price of oil at the right time, naturally erodes as the days tick by, so the fund is in the position of constantly buying more expensive futures out a month or two and selling less valuable futures that expire sooner. That’s generally a wealth-destroying proposition for a long-term investment if (and this is a big if) you believe that the price will move both up and down over long periods of time without much predictability.

That’s also why most of the levered ETFs (the 2X and 3X funds you’ll see touted from time to time) fail to hit their benchmarks once you get past a month or two of performance, the cost of the eroding time premium in their futures (the derivatives that they have to use in order to get that levered effect) eats away at the performance even if things go in the direction you&#