Oil collapse

West Texas Intermediate ($WTIC) compared to Guggenheim Airline (FAA), weekly, YTD, 2012

West Texas Intermediate ($WTIC) compared to Guggenheim Airline (FAA), weekly, YTD, 2012

The price of oil has cratered recently, getting hit hard by concerns that slowing growth in China, recessions in Europe and slower growth in The United States are causing demand to drop. The Canadian Oil sands also are expanding supply, and are expected to continue to increase sharply in the near term.

So how to profit from falling oil? Well, if you believe oil is going to continue to decline then an interesting way would be to purchase airline stocks. Airline ticket prices fall as oil prices decline, which in turn leads to increased customer demand since its cheaper to fly. The chart above shows the price of West Texas Intermediate ($WTIC, black line) and Guggenheim Airline ETF (FAA, red line). The chart below shows the top ten holdings of FAA. Year to date in 2012 West Texas Intermediate has fallen -7.83% while Guggenheim Airline is up 6.57%.

Top ten holdings of Guggenheim Airline (FAA)

Top ten holdings of Guggenheim Airline (FAA)

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