Energy stocks have been falling in price, as you might have noticed by looking at gas prices when you drive by the gas station. Crude oil, from which gasoline is derived, is just but one area where energy comes from. As oil prices drop, we might be thankful for the relief at the pump, but energy companies rely on these profits in order to succeed in the business world. Shale oil stocks are suffering right now thanks to disappearing profit margins and investors lacking confidence in them.
The price of oil has been going down steadily over the last few weeks, but on Friday, the price per barrel fell by about 10 percent, down to around $66. That’s the lowest it’s been in over four years.
For a country like Saudi Arabia–one of the world’s leaders in oil exportation–low prices are not a huge issue. They have the wealth to withstand significant drops in oil for many months. However, other oil producing countries do not. These countries will likely see widespread economic problems if this goes on for much longer. Looking to these countries and making sure that falling prices do not hurt your portfolio or future trades is a prudent idea. If you are able to, profiting off of this is also a good idea, depending upon your means. The short sale of stocks in foreign countries can sometimes be problematic, but there are other methods that you can use, such as the put side of binary options, if they are available.
There are also opportunities domestically. Within the U.S., for example, the energy sector of the S&P 500 fell by 6.3 percent on Friday’s trading following this news. Losses here are now over 10 percent for the year, and there is little relief in the near future. This means that there are still many chances for prices to keep going down. Being aware of this is necessary to protect your profit making ability.
In general, when prices fall, they are bound to eventually go back up. This in itself is an opportunity, but entering a position before this happens is a waste of your time, energy, and money. Until the market looks ready to rebound, short term trading is usually a better idea as you can profit off of small ups and downs in the market until a longer term strategy becomes a viable option. Using strategies that involve little risk and a lot of flexibility, such as binary options, are your best bet. Just be sure that you have a firm grasp on market direction and timeframes before going this route. A mixture of study, observation, and practical experience will help a lot.
Oil is a limited commodity. There is only a certain amount of it in the world, and when it’s gone, it’s not easily replenished. Therefore, the long term prognosis for this commodity is that it will go upward in price. A short term position, though, is much more difficult to figure out. If you’re looking at something to cash in in ten years, going long with oil is the way to go. In the meantime, short term traders should be paying attention to market conditions and poise themselves so that they can profit off of prices going either way. With a combination of futures contracts, binary options, and energy ETFs, you can position yourself to profit off of fluctuating prices, regardless of which way they go. You just need to make sure that you have the knowledge to look at oil and other energy source with some foresight so that you can predict price direction more effectively.