I'd like to find one or more relatively low-risk investments that
could be expected to profit in relation to an increase in the price of
oil.  The constraint is that these investments shouldn't directly
benefit
companies involved in oil exploration or oil refining, etc., e.g.
purchase of oil stocks or managed funds that include oil stocks.

Options strategies, i.e. combinations of calls/and or puts, that are
designed to minimize risk could be considered, although I'd like to
avoid using options unless there was a very strong reason for doing
so.  In general, I'd also like to avoid strategies based on futures
contracts unless there was some strategy with a very compelling
risk/reward ratio.

Answers that involve buying stock in alterative energy companies are
discouraged.  Recommendations should in some sense be plays on the
price of oil.

Please feel free to email me for clarifications on any of the above.

Thanks!

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Clarification of Question by baselnovo-ga on 07 Nov 2005 19:13 PST

For any options-related suggestions, the expiration dates for
near-term options should be (the third Friday of) January or February,
so the answers should spell out strategies that are specific about
strike prices and expiration dates.

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Clarification of Question by baselnovo-ga on 09 Nov 2005 08:23 PST

Sorry for not mentioning the near-term expiration date for options in
the first Question - it could have been clearer about that.

It all depends on where you live. If you live in Europe you can do
fixed loss spread betting which allows you to take a bet on the
direction of oil at $x per point. If it goes the wrong way then you
get stopped out at a certain level which you specify thus limiting
your loss.

www.cantorindex.co.uk and www.igindex.com are good starting points

This is similar to an option although the leverage effect is not the
same i.e. if you buy an out of the money call option and the price
rises significantly you can make more than you would on the fixed
spread bet for the same outlay.

It all depends on where you think the market is heading.

Options are safe enough if you buy them, the only downside is the time
expiry but everything has a price !

Other alternatives would be to find companies that provide oil
equipment and exploration technology (e.g Schlumberger) and those
companies which provide oil derivatives and in some cases oil
alternatives (rapeseed and sugar beet production)

COMPANIES LIKE HALLIBURTON WHICH ARE DOING HUGE IRAQ OPERATIONS MAY BE
GOOD TO INVEST IF YOU NEED HUGE GROWTHS.

"Fixed loss" spread betting is an anathema...  if the spot/fwd
contract gaps below your sell stop you're out of luck.  Some bucket
shops offer this "guarantee" but it's not worth the paper it's printed
on.

There aren't any direct investments outside of the option-world due to
you position restrictions.  The lowest risk in $-terms would involve a
straight call purchase or a vertical spread.  You can buy a Jan 55-60
call spread for $4.00, which offers convergence gains should oil trade
neutral or higher.  There are far better risk/rewards in long calendar
spreads or butterflies.  A back month 60-70-80 fly can be had for
approx $2.00 debit.  The PnL distro is algebraic; risking $2.00 with
an $8.00 max return at the peak of the distribution[$70 on Crude oil
futures] ... difference in strikes (-) debit paid = max gain at the
center[body] strike.

There are a variety of OTC/structured product options such as an
exotic touch options which would reach full payout were your barrier
strike reached.  A EOM Dec 70 touch "call" option, paying out $1000,
can be purchased for $160 today.

You could do what is termed a 'free trade' - this involves buying
options that are slightly out of the money and when the market moves
in your favor, you conversely sell options at the same premium to
recover your invested capital and with this capital now freed-up, you
buy more option further out of the money.

For free trade recommendations, check out:
<a href="http://www.instantcommoditytrader.com">http://www.instantcommoditytrader.com</a>.