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VIX and Volatility General Discussion


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VIX and Volatility General Discussion

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  #31 (permalink)
 suko 
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Liquidity in all four of those names is very decent, thanks.


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  #32 (permalink)
 SMCJB 
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Interesting question. Right now you can't charter a VLCC for floating storage. They are all gone. So in theory this should all be priced in. Doesn't matter if K/M goes to -$100 tankers are not going to make much more money than they are already. Question is does the heard realize that yet.

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  #33 (permalink)
 Trailer Guy 
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SMCJB View Post
Interesting question. Right now you can't charter a VLCC for floating storage. They are all gone. So in theory this should all be priced in. Doesn't matter if K/M goes to -$100 tankers are not going to make much more money than they are already. Question is does the heard realize that yet.

Wow, that was fast. Middle of last week an article which I did not see until Friday was quoting one of the ship tracking paid services saying 60 plus of the 800 plus were chartered for storage. Then I read about the Singapore oil trader going belly up and their shipping company going down also with about 16 VLCCs supposedly steaming back home to be tied up by the courts.

So these tanker stocks are going for roughly 50 percent of asset values. Frontline said their fleet break even was somewhere around 29,000 a day (I am hazy on that) and they are getting 125,000 to 150,000 a day up to 200,00, so yes, I can live with that for a quarter or two. Especially as this is the weakest season for tankers, but history is no longer a guide.

I said a couple of weeks ago the big threats were OPEC making a meaningful deal and the owners chartering a bunch of new builds. Well OPEC did what they always do so take that off the list. I am assuming China will offer very attractive financing because I am assuming credit markets are shutting down around the world.But I think a lot of new builds is a threat for a future year. I am ignoring the virus as there is zero sign that it will go away in 60 days and everything will return to what it was.

Has the heard figured this out? One thing I learned about tankers, they do not trade logically. I am positive a lot of people link tanker profits to oil prices directly and will walk away from you at a virtual cock tale party. If these stocks post back to back quarters of record earnings and have payouts exceeding 10%, well then the guys with a lot of gravitas sitting in high back leather chairs will be telling everyone to buy. So if it goes as it has in the past income oriented buyers late to the party who will post ugly as the Tsunami of new builds kills the market like it always does. But that is 2022 not 2020.

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  #34 (permalink)
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Trailer Guy View Post
Wow, that was fast. Middle of last week an article which I did not see until Friday was quoting one of the ship tracking paid services saying 60 plus of the 800 plus were chartered for storage. Then I read about the Singapore oil trader going belly up and their shipping company going down also with about 16 VLCCs supposedly steaming back home to be tied up by the courts.

So these tanker stocks are going for roughly 50 percent of asset values. Frontline said their fleet break even was somewhere around 29,000 a day (I am hazy on that) and they are getting 125,000 to 150,000 a day up to 200,00, so yes, I can live with that for a quarter or two. Especially as this is the weakest season for tankers, but history is no longer a guide.

I said a couple of weeks ago the big threats were OPEC making a meaningful deal and the owners chartering a bunch of new builds. Well OPEC did what they always do so take that off the list. I am assuming China will offer very attractive financing because I am assuming credit markets are shutting down around the world.But I think a lot of new builds is a threat for a future year. I am ignoring the virus as there is zero sign that it will go away in 60 days and everything will return to what it was.

Has the heard figured this out? One thing I learned about tankers, they do not trade logically. I am positive a lot of people link tanker profits to oil prices directly and will walk away from you at a virtual cock tale party. If these stocks post back to back quarters of record earnings and have payouts exceeding 10%, well then the guys with a lot of gravitas sitting in high back leather chairs will be telling everyone to buy. So if it goes as it has in the past income oriented buyers late to the party who will post ugly as the Tsunami of new builds kills the market like it always does. But that is 2022 not 2020.

Wish you'd posted this in the original crude thread.

This is a very hypothetical debate. I started writing a long reply but I don't have the time. I think we are both agreeing that there is value here, but debating a) how much value and b) how much is already priced in. In theory it should be simple. X% of the fleet is subject to spot rates and hence are earning a multiple of Y times what they were earning a few months ago. Hence earnings should be X*Y + (1-X)*TC versus X + (1-X)*TC where TC is their time charter rate. Then if you can agree a market expected P/E of say P then the expected share price is something like P * [X*Y + (1-X)*TC] instead of P * [X + (1-X)*TC]. (Ignoring fixed costs).

If you know X (their websites have this information just not sure how up to date is), Y (which was about 70k/day now depending when you charted >$150k/day) and TC you should be able you calculate expected share price based upon earnings surprise. I'm not an equity analyst so I haven't done that detailed analysis. Either way, what the Saudi's, Iran and Chinese are doing with their vessels (most of the worlds VLCC are owned by the three of them) are only important in that they effect VLCC rates.

It's easy to see from today's price action that the heard are trading tankers like the K/M WTI spread which is interesting because it is not necessarily reflective of floating storage rates. This is obviously not a long term trade. Question is with today's euphoria in tanker stocks (DHT +8%, EURN +10%, FRO +12%, STNG +18%) how much of that surprise is now priced in? You could be right that the last buyers in 6 months time marks the top, but if 90% of the gains have been realized in 3 weeks do you want to hold another 6 months for the last 10%. Of course if it doubles instead over the next 6 months the answer is yes!

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  #35 (permalink)
 suko 
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Which is more irrational, EURN at $10 or TSLA at $745?

On another tack, XOM at $41 with an IV rank of over 70: would XOM be a good proxy for oil volatility?

XOM looks like it's at a 15 year low.


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 SMCJB 
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@Trailer Guy and @suko

https://seekingalpha.com/article/4338753-oil-chaos-crude-tankers-perfect-setup

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 Trailer Guy 
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Stumbled into these earlier in the week on Twitter.
Today a half sarcastic thread on twitter about when to sell tankers. Opinion was when the big boys start pushing them and or the new build order book hits 50% of existing fleet.

Poster of the first chart apologized for title, should be now not no. Not sure about the date on the second, I saw it early this week. But both are from famous sources locked behind paywalls.

After the big ETF fiasco the "evil site" (Zerohedge) had some Goldman opinion up. They are thinking sometime in mid-May Cushing will be effectively full. Others have written that no one actually knows what that is. In any event seems like from there on out tankers and barges will be it. Odds of normal demand returning soon not looking very good. Nothing so far to disprove the tanker once in a trading lifetime opportunity. Nothing to show that Joe Average is going to be interested in that story despite Jim Crammer mentioning NAT.

tankers used for storage



tanker rates

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  #38 (permalink)
 suko 
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To be fair, this tanker thesis is turning into more of a long gamma story than volatility.

The weed stocks of 2020.


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suko View Post
To be fair, this tanker thesis is turning into more of a long gamma story than volatility.

The weed stocks of 2020.

But there is a very big difference. Tankers pay out big time (at least FRO and NAT) when they make it. And they all have profits up the wazoo (term I learned getting my MBA). At the same time this is like some Hollywood move plot. Nobody wants what they haul. A year ago they were abandoned and left to die by the big money analysts. And they are getting paid to not move oil which makes no common sense.

They are not sexy, they do not have a charismatic spokesperson like Elon to go on CNBC and hype the stocks. Now I gotta say if the viking princess twins that are inheriting Ship Finance, Front line, Golden ocean etc wanted to I bet they could. But no, all we have is a guy who runs a hidden value salvage fund (Mr. Krupperman) who goes by Kruppy, like I said, Hollywood stuff.

I agree there is no good way to get a handle on this. But there is going to be a year or so of really good dividends when just about every other source of dividend income is hitting the trash heap. History never repeats so just because my Dad got Frontline for under 20, collected more than that in dividends and spin offs and then sold for 65 does not mean it will happen again. But it did happen once. Oh and the pictures of the tankers do look impressive posted on the office wall.

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  #40 (permalink)
 suko 
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Incidentally, there is a wonderful novel about an investor who stumbles into the shipping business and learns some hard lessons, called "The Shipping Man" -- it really is a much different world from any other.


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