The Great OIL Trade Escape

Call it lucky, call it smart, but my OIL trade did pay off. To be completely fair, it caused me a few worrisome days and some strenuous moments with my husband and kids.

Buying OIL at $70.55 on August 6, 2008 was like shooting a bird in the sky (look at my post – “OIL has dropped 20% – time to buy?”. It was a little bit of a gamble and I had to sit in the position for over a week, watching OIL fall as low as $66.32, before it finally stabilized.

This was a good moment to buy more and though I generally don’t like to double my position this way, I felt it was quite secure to buy another chunk of shares at $67.15 on August 19th. My biggest concern was my investment in OIL represented about 40% of my portfolio. I couldn’t take it easy anymore and spend trading time playing with kids. I had to watch my position. It doesn’t matter where the market would move, this had to be a very short term trade.

Preferably just a day trade.

Luckily, my timing was great this time around and OIL closed higher – at $68.62. Watching the whole trading session, I once again felt that the support has been reached and OIL has a potential to move even higher. So, I decided to keep it overnight.

From the trading viewpoint, it might have been a good decision, but from the family perspective, it was not. On Wednesday, August 20th, EIA Petroleum Status Report was due at 10:35 a.m. EST (7:35 a.m. MST). August 20th was also the first day of school for our 4-year-old.

School starts at 9 a.m., kids wake up around 6 a.m. So, between 6 a.m. and 9 a.m. we have to go through the usual routine of: brushing teeth, making beds, doing morning exercises, eating breakfast, getting dressed and finally driving to school. Meanwhile, just after we finished breakfast, I noticed that OIL started to fall in price. Fearing some bad news, I got glued to my laptop, hastily scrolling through Ameritrade’s news headlines. At the same time both kids went berserk and my husband snapped at me for “my crazy behavior.”

Geez, I have to be crazy in the first place, to be a Trading Mom and truly believe I can be a successful one.

Well, by the time I got the kids dressed and came back to my laptop, OIL had sunk over $2.5 from the high of $69.62 to the low of $67.02. My heart sunk with it. That was probably the worst moment of my trading in quite a while. I had enough – there was no way I would leave the house (and my laptop). Lawrence had to drive Brian to school.

The fall lasted 55 minutes and had an plausible explanation – the Energy Information Administration (EIA) Petroleum Status Report showed a huge boost in the petroleum inventories in the U.S. of 9.4 M barrels weekly change.

To my surprise, however, OIL stopped its rapid fall right there and crawled back up to $69+. That was a good sign, so I unloaded half of my position at $69, bringing it back in size to the original bet. And instead, shorted twice as many shares of UUP – a much less volatile PowerShares DB US Dollar Index Bullish.

The next day – August 21st was fun – OIL has opened over $2 higher and I sold the rest of the shares at $72.05.

Today I watched OIL sink over $4 and close at $68.20….luckily, without me.

OIL – iPath S&P GSCI Crude Oil Total Return (NYSE)

UUP – PowerShares DB US Dollar Index Bullish (AMEX)