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Crude Oil Futures Price

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Crude Oil Futures Price
                
The crude oil futures price is different than the crude oil price in the cash (physical) market. Generally, the price of a commodity for future delivery is higher than the cash price due to carrying costs (insurance, interest, and warehousing fees). This is called contango. The opposite of contango is backwardation. Backwardation is when the price of a commodity for future delivery is lower than the cash price Backwardation is normal in a “seller’s market.”
                           
When you trade crude oil futures, your futures price depends on where you get into the market. After you post your initial margin, your profit or loss depends on where you enter and exit the market (minus transaction costs).
                             
For example:
                                
The contract size for crude oil is 1000 U.S. barrels. So each $1 move equals $1000. As the market moves your account value adjusts. If your account value drops below the maintenance margin, a margin call is due. A margin call can be met by offsetting positions or adding money to your account.
                           
Trading futures is like driving a car without insurance. You save the insurance premium, but if you crash you will wish that you were insured. If you have very deep pockets or deal with the physical crude oil product then futures may be for you. If you are a speculator with a limited amount of risk capital then crude oil options are a better way for you to invest in the crude oil market.

Click here to contact a commodities broker with experience in the crude oil market.

Crude Oil Futures

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Commodity trading is not suitable for everyone. The risk of loss in trading can be substantial. This material has been prepared by a sales or trading employee or agent of Van Commodities, Inc. and is, or is in the nature of, a solicitation. This material is not a research report prepared by Van Commodities, Inc. Research Department. Please view our Risk Disclaimer.

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