Hi i have some questions concerning oil futures. nymex light sweet crude 1. how is the inbuilt leverage like? for example for a $60 nymex contract what is the amount you need to put up as the futures margin? 2. What kind of contract peroids up there? example is there a monthly contract(futures contract that last one month) a 9 year contract ? a 3 year contract(36 months?) 3. what is the risk in buying oil futures? 4. apart from investing in oil stocks and oil futres how do you invest if your bullish on oil? 5.my broker says there is a very long term contract, however he says the price is a preminium( higher)($120 when oil is currently $60) is that true?
orginally posted by usman88 What is your 1)your average trade holding period ? 2)target in cents? 3)risk in cents you take? (for crude oil)
my futures broker says only refinaryies buy very long term contracts? so retailers like u and me don't?
Hi. I'd agrue that your broker should be able to answer pretty much all of those questions! As for far out contracts the issue is with liquidity and open interest. More people trade the front month contracts - hence there is a better market to get in and out. as for a further month contract being priced more than the near term that is something known as contango. Google that term to learn more...
the far out future reflects carrying costs. if the future is higher than the cost to store oil until the settlement date, you should sell the future, buy some spot oil, and store the oil like in a rented supertanker or something. (lol, obviously it's not doable for the retail level investor). or, if your research suggests that it is too high, you could sell it now, and then between now and expiration buy it back when the price has dropped. this is a great way to blow up your account, if you don't know exactly what you're doing.