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Carry trade in rubble to profit from higher oil

  • Chris
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2 years 10 months ago #1 by Chris
Hello everybody,

I would like to present another idea how to trade the "upcoming bottom in oil prices".

I am planning to short the russian rubble (RUB) against the USD and also against the EUR. You can check that the russian rubble is very strongly negatively correlated to the oil price. This is due to Russias dependency on the commodity within its household budget. That means if oil prices rises the russian rubble gets stronger. We all know in which historical weak conditions the rubble is due the low oil price. If you go short the RUB/USD or RUB/EUR you will profit rising oil prices. You will also profit from the much higher interest spread that russia pays (+11.5% per year.) in comparison to the US or EU. My broker credits the overnight carry every day on my trading account. If i add that this will be about 10% per year. In contrast to trading oil futures here you will have a positive carry versus negative carry in oil futures. One has to be carefully with leverage since margin is usually very small with the FX brokers. I need 5% margin on this trade at my broker. In this setup time actually runs for you not against you because you will be compensated for waiting. Of course there is a political risk in this trade. However I have been watching these currency pair very closely the last three months and oil price has been definitely the largest driver by far. I would even say the only driver. Political I would also expect an easing of the situation in the medium term which should lead to the drop of the economic sanctions against Russia somewhere down the road. This would also support the value of the rubble.

I am very excited about this huge opportunity in this oil price crash and I am looking forward for your feedback on this trading strategy.

Best regards from Germany

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2 years 9 months ago #2 by johnjohn
I think it's too late and way too risky to short the ruble as the boyz are letting oil prices rise even though oil inventories are still rising. Also, the markets are looking ahead to when the Saudis will eventually stop flooding the world with oil.

I wonder if higher oil prices were promised to Putin for his withdrawal from Syria??? That's a conspiratorial long shot, but possible. But whatever the reasons, oil is trending higher despite the lousy fundamentals.

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