How do I invest in Crude Oil?
Discussion
Is there a simple way to move money in and out of crude oil? basically I want an account where I can have some money sitting safely in a reserve and move that money in and out of crude oil as and when I want to be exposed to the market. The nearest thing I can find is spread betting, but I don't want to be leveraged or to have a situation where, in order to remain exposed to the market when a contract expires, I have to pay 'roll-over' costs. I just want to buy some oil and hang onto it until I want to sell it, then sell it, then buy some more later, then sell it, etc. Ad infinitum.
City index or IG, unless you are buying the physical underlying asset, the position is always leveraged as it is a margin position. The IG figure of 10261 means you need to put margin of $850 down per contract. 1 pip movement means a $10 movement and 1 pip also means 1 cent movement per barrel.
Both do demo accounts. If you notionalyy wanted a $10k exposure, then 1 contract get you that but with a $850 margin.
It's not hard to do the trades as not surprisingly they make it user friendly.
Do you have view on where oil is going ( i have never called it right or if I did I was too impatient so I avoid it now)
Both do demo accounts. If you notionalyy wanted a $10k exposure, then 1 contract get you that but with a $850 margin.
It's not hard to do the trades as not surprisingly they make it user friendly.
Do you have view on where oil is going ( i have never called it right or if I did I was too impatient so I avoid it now)
Lefty said:
I'm no expert but generally it's traded as futures contracts...
This is correct, but the problem with contracts is that they expire, meaning you have to pay to 'roll-over' your position to the new contract. I'm trying to avoid this.Hyper10 said:
City index or IG, unless you are buying the physical underlying asset, the position is always leveraged as it is a margin position.
I was trying to avoid leverage. For example, BullionVault enables you to buy £1,000 worth of gold and your balance will simply be exposed to whatever percentage change the gold price moves by and you keep it until you want to sell it - no expiry date. I want the same, but for crude oil. I realise that with BullionVault you actually own the gold - you don't have to take physical delivery as they'll store it for you - is there nothing equivalent for crude oil?Hyper10 said:
Do you have view on where oil is going ( i have never called it right or if I did I was too impatient so I avoid it now)
I know that it always seems to 'visit' certain prices, so if it's at, say, $80 a barrel, I could buy some and hold onto it until it touches $100 a barrel. Then bail out and wait for it to go down again. I'm patient enough to sit on it for a long time, but what I don't want, as I've already said, it to be leveraged as that could result in me being wiped-out if I buy it at $80 and it then falls to $60 before rising again. I'm happy to sit through a lengthy period of running at a loss, but what I don't want it for a short-term down-turn to clean me out ahead of a subsequent rise that would have seen me make a profit. Being leveraged means you get closed-out (in the event of employing a stop-loss) if the market moves against you, or you have to go into significant debt to keep a position open, if your broker will even give you the credit.[/quote]
I know that it always seems to 'visit' certain prices, so if it's at, say, $80 a barrel, I could buy some and hold onto it until it touches $100 a barrel. Then bail out and wait for it to go down again. I'm patient enough to sit on it for a long time, but what I don't want, as I've already said, it to be leveraged as that could result in me being wiped-out if I buy it at $80 and it then falls to $60 before rising again. I'm happy to sit through a lengthy period of running at a loss, but what I don't want it for a short-term down-turn to clean me out ahead of a subsequent rise that would have seen me make a profit. Being leveraged means you get closed-out (in the event of employing a stop-loss) if the market moves against you, or you have to go into significant debt to keep a position open, if your broker will even give you the credit.
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Open a spreadbetting account with IG and don't leverage then! Just trade to the value that you are comfortable with, rather than trading more than you're comfortable with. That way you won't get a margin call or get closed out if it moves against you.
As an aside, they also allow you to trade options on oil prices, which may appeal.
sideways sid said:
Open a spreadbetting account with IG and don't leverage then! Just trade to the value that you are comfortable with, rather than trading more than you're comfortable with. That way you won't get a margin call or get closed out if it moves against you.
As an aside, they also allow you to trade options on oil prices, which may appeal.
I have an account with IG Index but I don't want to put more than £4k into this venture. They would quote my target buy price of $80/barrel as 8000.00 with a minimum position of £1/point, so I'd need to put £8k in at £1/point to be exposed without leverage. That's double my budget. The only other option is to buy £1/point of crude at 8000.00 and put a stop at 4000.00, then hope that crude doesn't drop to $40/barrel. Unlikely, I know, but stranger things have happened.As an aside, they also allow you to trade options on oil prices, which may appeal.
Best have a look at Options instead.
Maybe you've got space for one of these in your yard?
http://www.tankservices.co.uk/oil-fuel-tanks-for-s...
http://www.tankservices.co.uk/oil-fuel-tanks-for-s...
You may find that options work for you.
I tend to sell out-of-the-money Puts on an upswing. Always happy to buy into oil at USD80 or so and if the price doesn't fall to exercise, I've got an income stream that is not (too) correlated to my other investments.
Remember that this kind of trade exposes you to a leveraged position though. Buying options instead gives complete certainty on your maximum downside - i.e. the cost of the option.
I tend to sell out-of-the-money Puts on an upswing. Always happy to buy into oil at USD80 or so and if the price doesn't fall to exercise, I've got an income stream that is not (too) correlated to my other investments.
Remember that this kind of trade exposes you to a leveraged position though. Buying options instead gives complete certainty on your maximum downside - i.e. the cost of the option.
The closest product to what you seem to be after would be an ETF/ETC. These have no direct rollover costs as they don't tend to expire, and can be either leveraged or unleveraged. Downside being that they are exposed to both currency and contango. This means it is possible for the spot crude price to go up by x% and the value of the ETF still go down.
There aren't any ideal ways to invest in oil in the medium-long term in the same way as you could in Gold, for example.
There aren't any ideal ways to invest in oil in the medium-long term in the same way as you could in Gold, for example.
MitchT said:
I have an account with IG Index but I don't want to put more than £4k into this venture. They would quote my target buy price of $80/barrel as 8000.00 with a minimum position of £1/point, so I'd need to put £8k in at £1/point to be exposed without leverage. That's double my budget. The only other option is to buy £1/point of crude at 8000.00 and put a stop at 4000.00, then hope that crude doesn't drop to $40/barrel. Unlikely, I know, but stranger things have happened.
Best have a look at Options instead.
I work for IG and you are spot on with that - the minimum exposure you could have at $80 would be £8,000.Best have a look at Options instead.
I don't know if options are the answer either, if we are talking about buying calls - cleary if the price doesn't go anywhere you are still going to lose money as the time value of the option gets chipped away.
limpsfield said:
I work for IG and you are spot on with that - the minimum exposure you could have at $80 would be £8,000.
It's a shame IG doesn't offer smaller bet sizes, maybe starting at 10p/point.limpsfield said:
I don't know if options are the answer either, if we are talking about buying calls - cleary if the price doesn't go anywhere you are still going to lose money as the time value of the option gets chipped away.
Yes, buying calls was what I was thinking. The thing with options is that I can risk a relatively small amount of money, but of course run the risk of losing it if the option expires without hitting its target. Maybe futures are the way, but with an upped budget.MitchT said:
Yes, buying calls was what I was thinking. The thing with options is that I can risk a relatively small amount of money, but of course run the risk of losing it if the option expires without hitting its target. Maybe futures are the way, but with an upped budget.
If you are going to do futures, you are in a worse position regarding trade size than spread betting. From memory one contract is $10 per tick but full details should be here: http://www.cmegroup.com/trading/energy/crude-oil/l...Gassing Station | Finance | Top of Page | What's New | My Stuff