Loading...
Symbols:
Authors:

Oil Price Spike: Time to Hedge Stock Bets

by: Larry MacDonald May 22, 2008    
Larry MacDonald

Larry MacDonald

About this author:
Become a Contributor Submit an Article
  • Font Size:
  • Print

If the price of crude oil doesn’t stop rising soon, stock markets are in for a swoon, judging from sell-offs today and yesterday. So how much further will oil rise?

I don’t know. What I do know is that hedging against this risk might be a good idea even for the Canadian market as highlighted by today’s drop in the broad index -- even though the price of oil climbed yet again.

In Canada, put options on the iShares CDN S&P/TSX 60 exchange-traded fund are one solution. Right now, such put options can be purchased relatively cheaply. The Montreal Exchange’s Implied Volatility Index did tick up Wednesday but the present reading, near 17.25, is still considerably below the peak of 32 reached in January.

Related Articles

This article has 5 comments:

  •  
    May 22 08:21 AM
    If oil retreats some of the gains will be given up and we will be back to where we where 8 weeks ago in the market. Energy is doing the bulk of the work holding the markets up. Its not a good sign to me when all of the commodities are the strongest stocks and the consumers and financial are at the bottom.
    Reply
  •  
    May 22 10:56 AM
    Larry
    Do you really think that the price of oil is going to go down? I think it may go down after the airlines go belly up and the world falls into a recession. No one will be buying oil when the economy grinds to a halt. No new oil fields have come on line for 4 years but demand by Chindia continues to grow. This is a formula for chaos and war.
    Reply
  •  
    May 22 12:15 PM
    We are in a bear market! I wrote about it today.
    theinvestingspeculator...
    Reply
  •  
    May 22 03:03 PM
    We need to develop our domestic sources asap. In addition we need to start developing alternative sources- coal, nuclear, solar, etc.

    The $100+ dollar/barrel oil prices are a blessing in disguise, because they make alternatives economically possible. But they will kill us (potentially literally) if there is no organization around developing the alternatives.

    This is coupled with a collapse of our financial system. That is the 1, 2 double punch and you are out.

    We need, in addition to the above energy scenarios, to TakeBackTheFed.com

    If we do not get off our duffs, we will truly be in trouble. NOW IS THE TIME TO ACT.
    Reply
  •  
    May 22 06:23 PM
    Grant Hudlow is back with his name spelled differently. Can we get this garbage out of here??
    Reply
More by Larry MacDonald

Investment Resources
Money Management 

Research 

Seeking Alpha provides these ads as a service to its leading contributors
Articles on related themes
Market Outlook 

Oil Price 

Alternative Energy 

Coal