Petrol
The broad application of oil, not only as an energy source but also through the products obtained after its refining, makes it extremely attractive to investors. Changes in its price result from both economic and geopolitical events.
Advantages of trading oil on financial markets:
- Trading is conducted 24 hours a day;
- Accessibility
- Lower costs - there is no need to physically transport or store the oil;
- Trading with financial instruments is more liquid than buying and selling physical oil;
- Possibility for quick reaction;
- Accessible with small amounts - trading on margin is offered with financial instruments, meaning you don't need to own the full amount of the investment you are making, but only a certain small percentage of the instrument's value.
Influence of the global economy on the price of oil
If investors expect growth in the global economy, the price of oil increases, driven by intensified consumption and demand. A decline in economic activity leads to precisely the opposite - limiting the quantities demanded and hence a decrease in price.
How to trade oil with ELANA Trading?
Oil through a Futures Contract
Oil can be traded through a futures contract. These are essentially agreements in which one party commits to make or take delivery of a predetermined quantity and quality of oil on a pre-agreed future date at an already established price.
When trading oil futures contracts, the following specifics should be noted:
- A commission is charged, depending on the number of traded contracts;
- The futures contract has a specific expiration date. Before it expires, a rollover of the position must be made. This means closing the contract with the expiring expiration and opening a new one with a more distant one. Otherwise, the position will be automatically closed upon expiration
- Trading is done on margin.
- One futures contract consists of 1,000 barrels;
- With a one-dollar change in the value of oil, the balance will change by $1,000.
Futures contracts related to oil are offered through the ELANA Global Trader platform.
Contracts for Difference on Oil (CFD)
Contracts for Difference (CFD) are derivative instruments for executing a buy-sell order for a certain quantity of oil – they represent contracts for difference on a futures contract. The instrument allows you to pay a portion of the value that you would otherwise pay for the corresponding amount of oil but to take advantage of the privileges of owning the asset.
Contracts for Difference on futures contracts related to oil are offered by ELANA Trading through the ELANA Global Trader platform.
- No commissions are charged
- Similar to futures contracts, they are traded on margin, but unlike them, it is possible to open positions with a much smaller volume
- Contracts for Difference also have a specific expiration date. Before it expires, a rollover of the position must be made. This means closing the instrument with the expiring expiration and opening a new one with a more distant one. Otherwise, the position will be automatically closed upon expiration.
Oil through Exchange-Traded Funds
An Exchange-Traded Fund (ETF) is a mutual fund that is traded on stock exchanges in the form of a traditional stock. The more well-known funds tracking the price of oil are: WisdomTree WTI Crude Oil ETC (OD7F:xetr), WisdomTree Brent Crude Oil ETC (OOEA:xetr)
Oil through Options
An option is a derivative that gives the buyer the right, but not the obligation, to acquire or sell an underlying asset (currency, indices, stocks, commodities, etc.) at a predetermined price (called the exercise price) at a pre-agreed future time (option expiration). For this purpose, the buyer pays a certain price to the option seller in the form of a premium.
On the ELANA Global Trader platform, oil as well as other commodities can be traded through options (on futures contracts).
Specifics of trading with options:
- The maximum loss is clear in advance (when buying the option);
- There is an opportunity to hedge already open positions;
- Automatic exercise at option expiration;
- The price of the option depends on a number of factors that need to be taken into account in advance: time to expiration, price of the underlying asset, market dynamics;
- Experience in options trading is necessary, as predicting market direction is not a guarantee of achieving a positive result;
- Commissions are charged