Q:

What are some tips for trading oil futures?

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Quick Answer

Crude oil futures are contracts where the buyer agrees to purchase a specific quantity of oil from the seller on a predetermined date and at a predetermined price, explains The Options Guide. Traders of crude oil futures contracts try to profit by purchasing contracts when they believe oil prices are ready to rise over time, and they sell contracts when they believe prices are ready to fall.

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Full Answer

In order to trade oil futures contracts, investors must open a brokerage account with a company that trades futures contracts, states The Options Guide. However, most online brokerages only allow customers to trade stocks and options. A few online brokers, such as E*Trade Securities, allows its customers to trade crude oil futures contracts.

Many investors who are bullish on oil prices take long positions in crude oil, according to The Options Guide. Investors who go long buy positions in securities, such as crude oil futures contracts, in the hope that the contract rises in value over time, explains Investopedia. One oil futures contract represents 1,000 barrels of crude oil. If an investor buys one contract and crude oil prices at the time are $44.20 per barrel, the contract is worth $44,200. If one week later crude oil prices are $48.62 per barrel, the contract is now worth $48,620.

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