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Investing in Crude Oil Futures – Have I Missed the Boat?

Nowadays, the ability to profit from energy futures and options is a valuable one. Even amidst the so-called Great Recession, majority of the world’s countries utilize crude oil and its by-products and, hence, profits in crude oil futures speculation will never dry up, so to speak. Of course, losses are inevitable, too, since investors and traders must go head to head on betting on the outcome of oil prices.

So, what exactly is a crude oil futures option? Basically, it is the right though not the obligation to call (buy, in layman’s terms) or put (sell, in layman’s terms) a thousand barrels of crude for a strike price (a certain price determined by the market) by an expiration date.

Take note than a premium must be paid by the buyer for this right although said premium is exclusive of commissions and other related fees. Also, the premium, commissions and fees represent the maximum risk of capital loss the option buyer may sustain in the transaction.

In said transaction, the option buyer hopes for the price of a crude oil future to sufficiently increase before the expiration date so that it can be sold for profit. However, a loss can also be sustained if and when said crude futures drops in price anytime before the expiration period.

Let’s take a hypothetical example between John, a buyer, and Jane, a seller. Let’s also assume that the current date is the 15th of January 2009 and the contract price for 1000 barrels of oil is $100. John believes that the price of crude oil will increase in two months’ time and Jane believes that it will fall in the same period.

John will enter his buy order for a single March oil futures contract at $100 with his broker while Jane will enter her sell order for the same futures also at $100. Both orders will then be routed to the crude oil futures exchange for pairing and execution, thus, obligating both John and Jane to the terms of the contract. Of course, the term “obligating” is used very loosely as indeed there is no obligation, just the right to call or put, as previously mentioned.

It must be emphasized that neither parties are obligated to wait until the expiration period to take the next step in the transaction. Thus, if oil prices rise to $110 in a week and John is willing to liquidate the contract at the point, he will profit by $10 per 1000 barrels. Jane can continue to hold her position until the expiration date, of which her profit and loss will be determined by the rise and fall of crude oil prices.

There are many factors that affect crude oil and, hence, crude oil futures contracts. The present information on crude oil and natural gas supply levels is weighed against past expectations and future forecasts, which then manifests as the degree of price volatility of the market.

Keep in mind, too, that oil futures trading may be a profitable investment venture but it is also very risky. Thus, not all investors are suited for it especially as buying options can and will wipe out the total amount invested.

Executive Bonuses – Another Reason to Start a Home Business

It’s good to know that rich corporate goons are protecting themselves and their bonuses.
Washington Mutual Inc. executives don’t have to worry about their 2008 cash bonuses taking a hit, regardless of the recent struggles in the housing market. WaMu lost $1.87 billion in the fourth quarter of 2007 alone, and executives anticipate that they will need an additional $8 billion to cover the expected losses for 2008. Sounds bad right? Sounds like the kind of losses that would hinder executive bonuses? Well, you’re just not being as creative as WaMu! It turns out that when it comes time to calculate executive bonuses and compensation; all the WaMu board has to do is EXCLUDE costs related to real estate foreclosures and mortgage defaults. It’s good to know that any upper level exec at WaMu will still be able to pay for that third vacation home or that yacht which they so desperately need.

In the meantime, those at the bottom of WaMu will surely be facing a “freeze” of some kind that keeps them earning as little as possible. I could be wrong. Maybe they’re going to be as generous with the lower ranks as they are with themselves, but it’s highly doubtful. After all, WaMu is a publicly traded company and it must account to it’s shareholders, which means it’s needs to be profitable or lose as little as possible (executive bonuses aside).

Also, Wamu announced last December that, at some point, approximately 3000 employees would be laid off. Hopefully, some of those 3000 will be the boneheaded executives that allowed their company to get into such a mess, but, again, that’s highly doubtful. Unfortunately, these types of situations usually cost those who are least responsible their jobs. I remember when the CEO of the investment company I worked for was fired. He walked away with some $60 million in stock options and cash. That seems like a pretty nice parting gift for someone who wasn’t doing his job as well as he should’ve been. Maybe I shouldn’t have quit my job after all. If I had known that a $300,000 bonus was coming my way if I just sat around waiting to get canned, I surely would’ve opted for that.

All sarcasm aside, I am actually glad that I quit my job. Now when I read about something like the WaMu bonuses, I know that although it still makes me angry it doesn’t affect me anymore. I own my own business and nothing I do is controlled by those who make too much and do too little. Everything I make, I earn. If I have a bad year, it hurts me… not those under me. I am truly happy to be done with the corporate world. The only way to get to the top is to be merciless and hurt others as you climb past them. Now, I am in control of my world and my success isn’t at the expense of others.

Before Investing in Residential Solar Power – Consider These Aspects

Before you start comparing the various alternatives for residential solar power available on the market, you should do some basic research about your home first. For starters, you want to assure that such a system is compatible with your house. Too many home owners have invested in residential solar without doing their homework first, don’t be one of them.

So what are the prerequisites for residential solar power?

Firstly you should take into account the kind of climate you have in your area. For example, those living in Southern California have an advantage over residents in Seattle. Energy from the sun can still be utilized almost everywhere, but you should be aware of what the local climate dictates – and adjust your expectations accordingly.

The second aspect is to factor in the age of your house. An older home can be a weaker candidate for residential solar energy systems, simply because the cost of implementing it will become very high. Drafty windows and doors combined with old insulation techniques can cause an older home to leak a lot of warmth, thus also wasting power. Not to imply that it is a poor idea to improve an older home with new, energy efficient technology. Just be prepared for that it probably will be more expensive than building the same thing from scratch.

The third point you should investigate is your current monthly power consumption. Consult your old power bills for this information. Like in the last step, high power consumption does not mean solar panels are pointless, just that it won’t benefit you as greatly as it could. In conclusion, anyone can harness the inherent power of the sun. But in order to decide if it is worth the investment you should carefully consider the above aspects.

By doing the above exercise you should at the very least get a much better idea of how power is utilized in your home. And even if you arrive at the decision that residential solar power isn’t right for your home right now, you will at least have gotten a few ideas on how you can reduce your current power consumption. That will benefit you as well as the rest of the planet.