clair27bruce's Blog

Most people consider that the cost of unleaded gas futures and crude oil futures are too low-priced around the existing levels for quite a few factors but tend not to realize a way spend money on energy futures and options.

What is a crude oil futures option? Basically, with an option for crude oil futures, an individual is not compelled to procure (call) or sell (put) 1000 barrels of crude oil for a specified price (strike price) inside a specified period of time (expiration date), but they do retain the option to acquire when they want to. This right leads to the option purchaser coughing up a premium. A possible example may be buying 1 June $65 crude oil futures call option for the premium cost of $1000. Commissions and costs still must be included since the premium charge does not take them into account. The premium paid along with the commissions and charges are the maximum risk of capital loss which an option buyer may sustain. Anyone speculating on this specific crude oil futures call option is hopeful for the price of June crude oil futures to improve sufficiently to be able to to sell (offset) the option for a return anytime before the option expires.

There are several futures contracts that are closely associated to crude oil futures since they are manufactured from crude oil including unleaded gas futures and heating oil futures. An unleaded gas futures option supplies the option purchaser the right but not the obligation to get (call) or sell (put) 42,000 gallons of unleaded gas for a set price (strike) by a particular timeframe (expiration date). One possible example is perhaps ordering 1 July $1.80 unleaded gas futures call option for $900. Once again, the premium cost won't take in commissions and costs. In the same way, the maximum capital loss risk is restricted to the commissions, payments and premium paid for that option. The idea in this example is that if July unleaded gas futures increase, the investor would sell their option for return before expiration.

Crude oil futures options and unleaded gas futures options investment are very dangerous and aren't suitable for all traders. Taking options may lead to the loss of the complete amount invested.

Both heating oil futures contracts and unleaded gas futures contracts are quoted in gallons whereas crude oil futures are quoted in barrels. This often helps distinguish concerning the crude oil and its distillates, although one barrel contains 42 gallons. In practically all cases, exactly the same volume of petroleum products are traded.

The writer of this information has 13 plus years of commodity option trading experience and wishes to inform traders in order that they might make cautious investment decisions based on a deeper awareness of the option markets before they risk their hard earned money. Future option trading is just not for everybody and only risk capital should be used when investing.