Oil Finances & Investment

Oil Finances & Investment

Oil.com provides simply putted information for everyone interested in entering the Oil Investment world.

Oil investment is the most interesting addition to any trading strategy.

Many websites and trading agencies may try to convince people otherwise, but there is no true profit without risk. A lot of money can be made through oil investment and even more so with the current oil market fluctuations, with oil prices riding on an economic roller-coaster. T. Boone Pickens, an oil investor, made $1.4 billion dollars (the largest one year earning by trading) in 2005.

Having said that we would like to make it simple for anyone interested in Oil Investment:

Two main ways of investing on Oil:

Investing in Oil ETFs (Exchange Trading Funds).

This is the simplest way and advisable for someone who is just starting out in the oil investment business.

Investing in Oil Future Prices.

This is a much more complex and requires further knowledge of the trading world. Earnings can be enormous but the possibility of winning more also raises the risks. So if you are just entering the oil investment world we recommend investing on Oil ETFs

Oil ETFs:

Exchange Trading Funds are public companies that track major stock indices in order to allow it's investors to get exposure to a wider market in the Oil sector rather than having stocks on a single company or index. Oil ETFs are similar to mutual funds and all their investments in oil are public. Oil ETFs pretty much follow the market changes good or bad. You can check the relation between the Oil price and the USO index (United States Oil Fund . ETF)

USO graph example

It can clearly be seen how USO follows the Oil price performance but trading at lower prices

Investors can buy or short-sell ETFs. Most trading companies follow Oil stocks & prices:

  • USO (United States Oil Fund),
  • OIL (IPath S&P GSCI Crude Oil Total Return)
  • DUG (UltraShort Oil & Gas ProShares)
  • UCO (PROSH ULTRA DJ CRUDE) . Double Leverage ETFs that follows Oil Futures

As mentioned before all these stocks are currently changing rapidly following the ups and downs of Oil prices. So if invested intelligently could lead to high profits.

If you want to learn more about Oil ETFs investment strategies and tips CLICK HERE

If you want to keep track of Oil ETFs prices visit our OIL PRICES SECTION

Oil Futures:

The Oil futures are exchanged on the commodities market. An investor trades with futures contracts. When buying a futures contract the investor is buying the possibility or option to buy (call) or sell (put) 1000 barrels of crude oil for a fixed price at a specified date and time. Unlike stocks, commodities have intrinsic value (since it depends on an existing good) and do not go bankrupt. If you buy a futures contract you can either buy (go long) or sell (go short) according to your speculation on futures Oil price. Trading with Oil futures is trading with the Oil market risks, not with Oil itself.

Trading with Oil futures involve a very high potential risk. So another possibility is to buy Options. In this case the option is the right but not the obligation to buy or sell a futures contract, at a fixed price on or before an expiration date. To buy (or go long) an option you have to pay a premium price. When you sell (go short), you receive a premium but you are liable for the entire contract value. This premium price plus commissions and fees is the maximum capital loss risk.

The Call Option (buying): If you buy December U$S 61 crude Oil option. You bought the right to buy 1000 Oil barrels at $61 each. You are hoping that December oil futures to rise in order for you to sell the contract before it expires. The Put Option: You can also enter the trading market by selling because you are dealing with the possibility, the option of selling. You are not selling Oil Barrels that you do not own. If you purchase December U$S 61 crude Oil option. You bought the right to sell 1000 Oil barrels at $61 each. Therefore, you are hoping December oil futures to fall in order for you to buy the contract before it expires.

Futures also pretty much follow Oil Prices. Look at the following comparison chart:

MiNy graph example

Main Oil & Oil related futures are:

  • Brent Crude Oil Futures
  • MiNY Crude Oil Futures
  • Crude Oil Futures
  • Heating Oil Futures
  • Gulf Coast Gasoline Futures
  • Russian Export Blend Crude Oil (REBCO) Futures

If you want to check the past and present changes of Oil Futures visit our OIL PRICES SECTION