Oil drillers Hedging Practice!!!!Hello Everyone,
The selloff in both VST and LFD makes no sense. As a matter of fact, most of the selling in the resource stocks makes no sense as they are out of touch with soaring metal and oil prices.
The oil drillers have been naked shorting the oil resource stocks, whose funds are then used to purchase the oil itself.
This strategy has paid wonders to them, as a soaring oil price more than offsets any possible rally in oil resource stocks.
This hedging is coming to a close. Eventually, either oil will stablize sideways or actually trade downwards.
When that happens the oil drillers will sell their oil and cover their naked short position on oil resource stocks like LFD.
I guess the temptation was just too much to see an soaring oil price, people wanted in and did not want to use their funds, so sell resource stocks short, get funds, buy oil, then sell oil and cover short position.
All of this is illegal of course, but is gonna tell or verify. I mean we live in the crime capital of the world, there are no regulatory authorities whom are even interested in verifying these trades.
Even wonder whom the heck was selling at such low prices and why? It is drillers get as much $$$$ as possible, of course free, to ride oil to new highs.
All makes sense.
In due course, resource stocks will come back with force, LFD included and price will be trading north of $ 4 per share for LFD.
Be patient, all good things come to longs!!!!
JMHO