Trading on oil: futures, options and ETFs – genxfxtrader

Trading on oil: Futures, options and ETFs – genxfxtrader

In a
previous post we introduced the economic dynamics that regulate the oil market. Now we intend to highlight some of the most liquid financial instruments ( futures, options and ETF ) whose underlying oil.

The two main stock exchanges where they
are traded petroleum are the 
Chicago Mercantile Exchange ( CME )  and the Intercontinental Exchange ( ICE ) . Both offer contracts on WTI and BrentBut the most liquid contracts are the CME on WTI and Brent on ICE. The CME also offers a contract for WTI reduced in size. Let us briefly the characteristics of the most liquid contracts.

CME – WTI Light Sweet Crude Oil Futures (Ticker: CL)

The WTI Light Sweet Crude Oil Futures Contract is the most traded oil contract on the CME.
With more than one million contracts traded each day always has a
high liquidity .

The E-Mini Crude Oil Futures allow you to
operate on a contract whose size is half that of his older brother, thus ensuring
easier access to the private investor.

ICE – Brent Crude Futures (Ticker: B)

The liquid contract on
BrentIt is traded on the ICE. Brent crude prices is of great importance because in it two – thirds of world production are based.

Options on futures

CME and ICE also offer
options on futures contracts on oil. If exercised, these options are transformed into a long or short position in the underlying futures . They are American – style options, which can then be exercised at any time until maturity.

CME – WTI Crude oil options (Ticker: LO)
ICE – Brent crude oil options (Ticker: B)


futures and options on oil contracts are complex contracts for a private investor who may feel more comfortable operating through
ETF  that they are less complex. In the US, the ETF that follows the trend of crude oil prices is the USO  (United States Oil Fund). Seen how impractical to physically have the oil, use assumes a long position on sul  front month WTI Oil future . Two weeks before the expiration of the future, the position is relieved by the subsequent contract. Since the curve future is in contango in most cases, this continued activity of rolling (which normally sells the closest to expiration contract and buy one more at a higher price due tending to be phased out in the course of time) can lead to cost noticeable in the medium term. That is, USO works well as a vehicle for short – term trading, but it is not advisable to keep in the portfolio for long periods.

An alternative, in order to gain exposure to the oil market, avoiding the problems related to contango in the futures curve is investing in ETFs
on the oil sector companies.

On these, in the American market, we include:

XOP  (SPDR S & P Oil & Gas Exploration & Production ETF) reflecting the performance of an index equal-weighted  companies in the sector Oil, Gas Exploration and Production.
XLE  (Energy Select Sector SPDR Fund), which reflects the performance of a basket of market-cap-weighted companies in the sector Energy in the S & P 500
OIH  (Vaneck Vectors Oil Services ETF) reflecting the performance of an index of biggest 25 companies listed in the sector Oil-services .

Consider how these ETFs that invest in oil companies are correlated with the 
USO (oil) and the SPY (which reproduces the evolution of the index S & P 500). As expected, the ETF on oil companies, as well as to correlate with oil prices also tend to follow significantly the evolution of the stock market as a whole.

Europe no ETF on oil, since, in accordance with the UCITS Directive , UCITS-compliant ETF should nsuring a certain degree of diversification and can not invest in a single raw material. However, exiten numerous ETC (Exchange Traded Commodities) that, unless funds are allowed to replicate the performance of one (or more) commodities . Are securities issued by a car company through direct investment, through derivatives in the raw material which seeks to replicate the performance.

As in the
US, there are ETFs that allow investing in
companies in the oil sector. These include:
EXH1  (iShares STOXX Europe 600 Oil & Gas)
OIL  (Lyxor STOXX Europe 600 Oil & Gas)

The index 
STOXX Europe 600 Oil & Gas  includes the largest European companies in the energy sector (oil and gas).


in the US
There are also
options on ETFs linked to oil. They are traded on the CME and, in most cases, can boast considerable liquidity. With respect to options on futures, ETFs are more affordable for private investors because the underlying on investing are smaller. The options have an underlying ETF 100 ETF securities to which they are linked. For example, the value of the underlying option on the XLE   (ETF traded at a price of $ 68) will be equal to $ 6,800 ($ 68 x 100 shares).

The ETF options are Type
American and foresee  physical delivery of the shares covered by the contract should exercise them .

$ 24500 for oil future is a lot of money.
Volatility is tremendous, these last days is moving between 45 and 55 dollars. What makes 5000 dollars within hours.

That is why many have to resort to OTC markets (in the OTC markets financial instruments are traded between buyers and sellers without any authority that mediates between the two sides)

Conclusion because of the large amount of money to trade futures, many we have to go to otc with fewer guarantees.

There are also mini futures $ 5,000 nominal oil

liquidity is lower and the worst fork, but if you wait a few dollars lurching or should not worry about it

Hi Paituito

There are many instruments whose subjacente oil. Here we have chosen to talk about some of the most liquid listed. Undoubtedly there are many more such as CFD, ETC, ETC unleveraged, it was hard to put everything in a post and we elect to discuss the most important contracts

Well, I’ve touched the issues of CFD, because I think to lower accounts to $ 10,000, is perhaps the best tool to access this market taking risks aceptables.Para the vast majority of mortals, futures, for example, is a Russian roulette.
rich-poor-poor-rich in a plis plas … !! If no operas with a very “pretty” features heart attacks can be stacked …

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