| Are you familiar with Nymex oil futures? Do you | | | | contract. Fortunately, there is a way to trade oil with |
| know what they are, and why they are there? If | | | | as little as $100. Internet brokers offer leverage to |
| you are a car owner, you better be, because this | | | | make this market accessible to the regular man in the |
| financial instrument decides the price you have to | | | | street. Some brokers offer leverage for oil trading up |
| pay for a gallon of fuel at the station. Instead of | | | | to 1:100. This means that for every dollar the price of |
| complaining about soaring prices at the station, you | | | | oil goes up, your profit will be $100. Obviously, this |
| could also be the one profiting at the trading floor. | | | | works in two ways, so a price decrease of $1 results |
| The New York Mercantile Exchange (Nymex) is the | | | | in a loss of $100. Because of this leverage, you are |
| largest physical commodity futures exchange in the | | | | not buying a virtual 1,000 barrels, but only 10. |
| world. The leading traded oil future is the ‘Light | | | | Making the market even more accessible, you only |
| Sweet Crude Oil’ since this is the most wanted | | | | have to bring in the amount of money that you are |
| form of crude oil. It is used to process into gasoline, | | | | taking a risk for. So lets say you buy a contract at |
| kerosene, and high-quality diesel. The price of the | | | | the price of $75 because you think the price will go |
| sweet crude oil future at the Nymex can be seen as | | | | up. But since you want to limit your risk, you set |
| the leading price for oil producers and consumer | | | | your stop loss at $70. This means that whenever the |
| around the world, such as airlines and refiners. | | | | price hits $70, your oil futures will be sold and you will |
| The oil futures traded at the Nymex are contracts | | | | have to take the loss of $5 per contract. Since this is |
| with a delivery date in the next month. Each contract | | | | the maximum you can loose, you don’t have to |
| is 1,000 barrels, or 42,000 gallons. The contracts are | | | | pay the $75 for each contract when you make the |
| traded for 23 hours and 15 minutes each day from | | | | trade, but only $5. |
| Monday to Friday electronically (with a break from | | | | By combining these two mechanisms, you can |
| 5:15 PM to 6:00 PM), and from 9:00 AM until 2:30 PM | | | | suddenly enter the oil futures trading market with as |
| in the open outcry, also called the pit session. The | | | | little as $100. Find yourself a good broker, deposit |
| open outcry is one of the few places left where | | | | some money, and you are ready to go. It’s as |
| buyers and sellers trade by hand signs, signals and | | | | easy as that. So next time those prices at the gas |
| shouting out loud. | | | | station make you angry, think about the possibility to |
| Most private individuals are not able to buy a whole | | | | be on winning side next time, and start trading oil |
| contract, since a 1,000 barrels of $70 each would | | | | futures! |
| require the individual to bring in $70,000 for just one | | | | |