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If lower oil prices are the best thing for airlines, then what's up with Southwest (NYSE: LUV)?
Chart Courtesy of StockCharts.com
As with anything else, too much of a good thing always turns out badly. And that's what happened to Southwest's hedges against higher fuel prices.
when the price of oil fell, Southwest lost $247 million as its bets went wrong.
Which of course begs the question. What kind of advice did the airline get. If you play the markets for hedging or profits, you have to be prepared to be wrong, and to have to reverse your position.
After all, oil prices went higher and higher giving Southwest plenty of opportunity to sell its profitable hedging positions at higher prices.
Now, the stock seems headed for new lows. And what could make things worse is what could happen if oil prices start to rally once again, especially if Southwest panicked and sold any viable hedges at the bottom.
The bottom line is that if you live by the sword, you've got to know how to use it. Maybe a copy of "Trading Futures for Dummies" would have helped. (That was a joke, not so much a bit of shameless sef promotion).
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Doctor Joe Duarte's Market I.Q., offers subscribers a unique blend of intelligence, market commentary and trading strategy. Duarte's daily articles, and news summaries offer recommendations and analysis for ETFs, and individual stocks in the technology, health and biotechnology, and energy sectors. Doctor Duarte is a writer, and an emerging futurist, with a diverse background, and a growing audience. His combined expertise in health care, energy, and the effects of politics and global intelligence on the financial markets offer a unique blend of insight and information to thousands of active investors and political and intelligence aficionados around the world on a daily basis.
He is the author of four books: "Futures And Options For Dummies," "Successful Energy Sector Investing," "Successful Biotech Investing" and co-author of "After-Hours Trading Made Easy."
In early 2001 Dr. Duarte in "Successful Energy Sector Investing," correctly predicted that Venezuela's political problems could lead to an energy crisis in the United States.
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He has also appeared as a weekly guest on Market Mavens Radio, has logged appearances on KNX radio in Los Angeles, Financial Sense.com radio, and Wall Street Radio.
One of CNBC's original Market Mavens, Dr. Duarte has been writing about the financial markets since 1990.
His articles and commentary have been featured on CBS Marketwatch, Barron's, Smart Money, Medical Economics, and in Technical Analysis of Stocks and Commodities magazines.
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