Crude oil trading holds great interest in trading among traders. The key reason is it offers high liquidity. Crude oil offers excellent opportunities for profit irrespective of the market conditions. There are many options that prevail for investors to do this, but each one comes with its varying amount of risk involved. Direct investment with crude oil as a commodity or through ownership of related equities can be done.
What are the direct methods of trading crude oil?
Own crude oil as a commodity: You can invest in crude oil by purchasing oil futures or oil futures options. They differ largely in terms of the buyer and seller contracts as well as the obligations concerned by either party. These contracts are exchange traded. Futures are considered highly volatile. A reasonable amount of research and a large capital investment is required.
Purchase oil exchange traded funds (ETFs): The commodity-based oil traded funds or oil ETFs trade on the stock exchange and can be bought or sold like stocks. The exposure to the amount of crude oil would depend on the amount of money one invests. For instance, it could be as little as one share in a crude oil fund, which would interpret to the percentage ownership of a barrel of oil.
What are the indirect methods of trading crude oil?
This involves buying energy-sector ETFs or energy related mutual funds. These financial instruments are energy-specific which means they invest only in the stocks of oil and oil service companies. Lower risk is involved in this process.
Important points to be noted while trading in Crude oil
Knowing crude oil contracts, the exchanges that deal with these futures trading, and aspects that affect the prices are important.
Risk management through hedging or other approachescan prove to be very helpful for traders. The method for managing risk can be valuable to all stakeholders. There are several sources to base one’s investment in crude oil.
For instance, if you are looking for intraday trading, the mcx crude oil tips, which are updated real time, can be useful indicators to settle on hold, buy and sell.
Volumes, the strength of trends and identifying the current joining crowd is of massive importance. Understanding the trend and related charts is of immense importance. Learning what drives this commodity, its long-term price history and the various physical grade differences will help investors who wish to trade oil futures.