Shorting Oil When Dollar Rises
|December 12, 2012||Posted by Oddmund Grotte under strategies|
The price of oil is seen as a hedge against a falling dollar. If the dollar falls, oil should rise (or vice versa). What happens next day if they go in tandem?
- If the dollar rises more than 0.25% (using UUP as a proxy) from yesterday’s close until today’s, and USO also rises 0.25%, go short USO at the close and exit on the close next day.
This is all there is to it. Here is the results from January 2007 until present:
|P/L in %||#trades||#wins||Avg|
And here is the equity curve:
Some of these gains are unlikely to come from the dollar effect: Before you invest in USO, you have to understand how it’s structured. It’s meant to replicate the price of oil, but in the long term it won’t because of different costs. There is a lot of info about it on the internet. You can start with reading this link.