Locking in the price of diesel
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11-28-2008, 12:57
Post: #1
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Locking in the price of diesel
Folks,
The average price of diesel, country wide, is around $2.50 per gallon. We all know that in the long run, prices will go up. I stumbled upon and ETF that allows you to lock in the price of gasoline. The ETF is managed by a firm called United States Commodity Funds LLC (I have no financial interest). Although USCF doesn't have an ETF that tracks diesel fuel prices, gasoline seems to be a reasonable approximation. The gasoline ETF has a ticker symbol: UGA Today's price for UGA is $23.96. Assuming I'll travel 10,000 miles next year, and I get 7 mpg, I'll need 1500 gallons. At today's diesel prices I'll spend (1500 x 2.5) = $3750, so I buy $3750 worth of UGA. As the price goes up at the pump, I get the same percentage movement in UGA. After each fill up, I call my broker and sell the same amount of UGA. This way prices can fluctuate all they want but I'm guaranteed to not spend more than $2.50 per gallon for my next 1500 gallons. Of course, as with any futures contract, the price per gallon may go down (not likely). In this case, I'll spend less at the pump, but my UGA holding will decrease by the same percentage. In this case I'll probably not sell UGA and simply hold it till prices appreciate. David Brady '02 LXi, NC |
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Messages In This Thread |
Locking in the price of diesel - David Brady - 11-28-2008 12:57
Locking in the price of diesel - George Burke - 11-28-2008, 16:29
Locking in the price of diesel - Pete Masterson - 11-29-2008, 03:44
Locking in the price of diesel - David Brady - 11-29-2008, 04:41
Locking in the price of diesel - hippieforever3 - 11-29-2008, 06:08
Locking in the price of diesel - David Brady - 11-29-2008, 06:15
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