Oil Futures And The NYMEX

The New York Mercantile Exchange (NYMEX) is pretty much the biggest physical commodity futures exchange in the world. It is owned by CME Group who are world leaders in providing futures pricing. The leading traded oil future is the 'Light Sweet Crude Oil' since this is truly the most wanted sort of crude oil. It is used to process into kerosene, petrol, and high - quality diesel. The price of the sweet crude oil future at the NYMEX is seen as the leading price for petroleum producers and consumer all over the world, such as refiners and air companies.

Oil futures are traded at the NYMEX via contracts with a delivery date within the next month. Each contract is 1,000 barrels, or 42,000 gallons. The contracts are traded from Monday to Friday for nearly 24 hours electronically (only taking a break from 17:15 to 18:00), and from 09:00 until 14:30 during the open outcry, which is also named the pit session. The open outcry is one of the few places left where traders deal by hand signs, signals and shouting aloud.

Most private investors are not able to purchase an entire contract, since 1,000 barrels of $70 each would need the individual to bring in $70,000 for only one contract. Fortunately, there is a means to market oil with less than $100. Leverage is offered by internet brokers to create this market accessible to the simple man in the street. Some brokers offer leverage via margin for trading up to 1:100 which means that for every dollar the cost of oil goes up, your profit will be $100. Clearly, this works in two ways, so a cost decrease of $1 results in a loss of $100. As you are possibly not buying a virtual 1, 000 barrels, but only 10, a consequence of this leverage.

Making the market much more accessible, you just need to bring in the money that you are taking a risk for. Therefore let us say you purchase a contract at the price of $75 because you consider the price will go up. But since you need to limit your risk, your stop loss is established by you at $ 70 which means that whenever the price hits $ 70 the contract will be sold and you will need to take the loss of $ 5 per contract. Since this is the maximum you can lose, you do not have to pay the $75 for each contract when you make the trade, but only $5. By combining both of these mechanisms, you can suddenly enter the oil futures trading market with less than $100. Find yourself a great agent, deposit some money and you are ready to go. It really is as fundamental as that. So whenever you find that those costs at the gas station make you upset, think about the opportunity to be on winning side next time, and begin trading oil futures!