The amount of money you’ll need in your account to day trade a crude oil futures contract varies depending on your futures broker, but you’ll need at least $1,000. Keep in mind that you’ll need enough funds in your account to cover any possible losses. If you don’t want to risk more than 1% of your cash on every single trade, you can limit yourself to $10 per trade.
What is the crude oil futures margin requirement?
The large crude oil contract, with an average daily traded value of Rupees 2500 Cr, is unquestionably one of the most valuable contracts traded on the MCX. Let’s get right to the big crude’s contact information without wasting any time.
Let’s take a closer look at this information. On the MCX, crude oil is traded on a per-barrel basis (one barrel is equal to 42 gallons or about 159 litres). Take a look at the graphic below for an example of Crude Oil Market Depth –
As you can see, the Crude Oil contract expiring on the 19th of December 2016 is trading at Rs.3197/- a barrel, which, as we all know, is a per-barrel price quote.
The lot size is 100 barrels, which indicates that if you wish to buy (or go long) crude oil, the contract’s value will be .
This is the crude oil contract value, but what about the margins? Unlike other commodities, crude oil has a slightly bigger profit margin. The margin needed is around 9% if you want to carry the position forward overnight.
In fact, you can use the margin calculator on Zerodha’s website to receive a quick estimate of how much margin you’ll need. Here’s an example of the same
If the price of Crude is Rs.3,253/-, the margin requirement under NRLM (for an overnight position) is Rs.29,114/-. However, if you want to use MIS to conduct an intraday trade, the margin requirement is around 4.5 percent. As you can see from the screenshot above, the MIS margin is only Rs.14,557/-.
What is the value of a crude oil futures contract?
Crude oil futures contracts have a 0.01 per barrel specification and are worth $10.00 per contract. Sunday through Friday, electronic trading of crude oil futures is performed on the CME Globex trading platform from 6:00 p.m. U.S. to 5:00 p.m. U.S. ET.
What is the duration of an oil futures contract?
You’re not going to the store and buying a couple thousand 55-gallon barrels of crude oil to store in your backyard, are you? That’s just not feasible.
Crude oil futures contracts were created to allow oil corporations and companies that consume a lot of oil to plan delivery of the commodity at a set price and date. Today, these contracts are also traded between speculators who expect to profit from the commodity’s volatility.
On the futures market, these derivatives are a hot commodity, with the potential to generate large gains in a short period of time. Unfortunately, when bad decisions are made, the consequences can be just as severe.
The majority of oil futures contracts include the purchase and sale of 1,000 barrels of crude oil. When a contract is purchased, it stipulates that these barrels of oil will be delivered at a certain date (up to nine years away) and for a predetermined price at a predetermined date (or expiration date).
Let’s imagine you bought an oil futures contract today with a three-month expiration date; you’d be owed 1,000 barrels of oil three months from now, but you’d pay today’s price let’s say $50 per barrel as an example.
You notice that the price of oil has climbed to $51 per barrel in 30 days, indicating that your futures contract is now worth $1,000 more than you paid. If the price of oil fell to $49 per barrel, on the other hand, you would have lost $1,000.
In either case, you’ll want to sell as soon as possible when the contract expires. Individual investors and price speculators who aren’t large-scale crude oil users typically close off futures contracts well before they expire.
- You’re probably not going to be able to store 1,000 barrels of oil. You probably don’t have enough room to store 55,000 gallons of oil. If you own the contract when it expires, you’ll have to decide where to store the oil and what to do with it. Your entire investment is gone if you opt not to take ownership.
- Futures contracts lose value as they get closer to expiration. The futures market operates at a breakneck speed, with the thrill being in forecasting what will happen in a week rather than when the contract will expire. The premium paid for future value growth decreases as the contract approaches its expiration date. As a result, holding these contracts for too long will limit your prospective gains.
Pro tip: If you want to invest in oil futures, you should open an account with a broker who specializes in future contracts. When you open an account with TradeStation, you can get a $5,000 registration bonus.
What is the process of trading oil futures?
Oil futures are agreements to exchange a specific amount of oil at a specific price on a specific date. They’re traded on exchanges and reflect distinct forms of oil demand. Oil futures are a popular way to purchase and sell oil since they allow you to trade increasing and decreasing prices.
Can I invest in oil futures?
You can invest in oil commodities in a variety of ways. Oil can also be purchased by the barrel.
Crude oil is traded as light sweet crude oil futures contracts on the New York Mercantile Exchange and other commodities markets across the world. Futures contracts are agreements to provide a specific quantity of a commodity at a specific price and on a specific date in the future.
Oil options are a different way to purchase oil. The buyer or seller of options contracts has the option to swap oil at a later period. You’ll need to trade futures or options on oil on a commodities market if you want to acquire them directly.
The most frequent approach for the average person to invest in oil is to purchase oil ETF shares.
Finally, indirectly investing in oil through the ownership of several oil firms is an option.
How can I make a little investment in oil?
Your brokerage account is usually the best location to search if you want to invest in oil with a small amount of money. You can now buy stock without worrying about costs cutting into your investment thanks to the recent introduction of no-fee stock trades at all of the major brokerage firms.
You can buy fractional shares from some brokers if you don’t have enough money to buy a whole share.
Is crude oil trading profitable?
Crude oil, aside from gold, is one of the most successful trading commodities for investors. Trading crude oil, while lucrative, is difficult, especially if you lack the necessary tactics and are uninformed of the crude oil inventory. Crude oil trade is fraught with dangers. Small traders typically struggle to take advantage of the vast chances that this valuable commodity offers due to a lack of a comprehensive plan. So, to make things easier for tiny traders, we’ve put together a list of tried-and-true tactics that will help you win handsomely from crude oil trading.
The purchase and hold strategy is the most common among the several methods used by traders in crude oil inventory today. It is practical and allows traders to profit handsomely. Crude oil, like other commodities, operates on the demand and supply premise. Traders use this method to take into account demand and supply considerations. As a result, they take a measured stance. If the trader’s estimate proves to be correct, they close their position quickly and profit handsomely.
When trading crude oil, one of the most important things a small trader must consider is developing a strong plan that will help him profit. Not having a strategy, or having a bad one, will be costly and result in losses. There is a significant contrast between trading crude oil and investing in the stock market. In most cases, the latter is based on emotion and supposition, but not in the case of crude oil. You must have a thorough understanding of the energy business to achieve profitability. It is critical to enlist the assistance of market advisors for this. You must be well informed or have experts who are well informed about global social, economic, and political trends, particularly in countries that export crude oil. You will calculate how a significant shift in trends may affect your crude oil inventory trading today if one occurs.
Brent and West Texas Intermediate (WTI) crude oil are the two forms of crude oil traded. Both of these sorts are distinct and have their own set of advantages and disadvantages. WTI is one of the global oil benchmarks and is produced in the United States through fracking. Brent is extracted from the oilfield, whereas WTI is one of the global oil benchmarks and is produced in the United States through fracking. Some countries, such as India, import Brent, while others use WTI. You can trade in either of the two varieties, but you must be familiar with how they perform and which one will be profitable.
Spread trading is a highly effective strategy that, when used correctly, can yield substantial profits. Traders use this strategy to buy crude oil contracts for a specific month and sell another crude oil future contract. Traders can profit from the differences in the purchasing and selling prices of the two contracts in this way.
To make the most money, you must be well-versed in the aspects that drive crude oil trade. US API Weekly Crude Oil Stock, US Crude Oil Inventories, US Gasoline Inventories, and US EIA Weekly Distillates Stocks are some examples of reliable inventory data. These reports will provide you with detailed information on the outlook, demand, and supply, among other things.
Crude oil trading is extremely profitable, whether you are a small trader or a large corporation. However, if you performed it correctly, it would be beneficial. You may earn tremendous rewards by establishing a strong plan, understanding today’s crude oil inventories, and collaborating with the proper investors or organizations like Enrich Broking. So, for the greatest outcomes, work with a trustworthy and authentic company like Enrich Broking to get your crude oil trading off to a good start.