May 26, 2007
If you were sitting in early March thinking, "hey, these gasoline prices seem suspiciously low right now," and had a feeling they were going to go up during the summer (again) you could have gotten free gasoline from that moment until the end of summer. Lets say you buy gasoline once a week at an average cost of $50 (which I think is reasonable unless you drive a monster). Given that number, your gasoline bill from March - August will be $1200. Now lets say at the moment you had that insight about the suspiciously low gas prices you bought an out of the money call option for Valero (one of the biggest gasoline refining companies in the world) expiring in September at a price of $400. If you sell that option when the stock market opens on Monday morning you would make a total profit of, drum roll... $1200. And who knows, the value of the option could continue to appreciate and you could get free gasoline well into the fall.
I still don't think oil companies are colluding to rip off the consumer; but I know there are some people who believe deep in their hearts that such is the case. To those people I say: invest in the oil companies so that when they make money, you make money! Its all about thinking ahead and planning for the worst. Simple hedges like the one I mentioned are a great way to put a little more spending money in your pocket if things get more out of control than the mainstream wants to accept.