Wednesday, July 11, 2007

Oil Plays


I've gotten a few emails asking on how to handle rising oil prices. Sound Of Cannons is staunch in it's prediction that we will never see $40/barrel again. Better to prepare and profit from it than stay foggy in a pipe dream of cheap energy. Below are 3 ways to safely play the (continually) rising price of black gold.


The Slippery Slope of Oil

After catching a break with falling oil prices for the second half of 2006, consumers are once again being hit with higher oil prices. Oil - which dropped from almost $80 a barrel last summer to a more tolerable $52 a barrel in January - is now hovering around the $70-a-barrel mark.
Worse, it looks like oil is heading back to that $80 level. Though it has a way to go before it reaches the peaks we've seen before, it will probably continue its upward path for the next few months.
What to do? Obviously, you can save money by cutting back on using gas. But you can also make money on rising oil prices, and you don't have to trade in the futures market to do it. There are several ETFs (exchange-traded funds) you can invest in that will rise as long as oil is rising:


- United States Oil Fund (USO) is a direct investment in oil. It holds futures contracts on oil, and moves up and down with the price of oil.
- Oil Services HOLDRs Trust (OIH) invests in the stocks of companies that service the oil industry. It follows the up and down movements of oil very closely.
- Energy Select Sector Spyder (XLE) invests in energy companies such as ExxonMobil and Chevron (the two largest holdings in the fund).


You can protect yourself from rising oil prices - and take some of the sting out of what you have to pay at the gas pump - by investing a portion of your portfolio in any of these three ETFs.

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