T & K Futures and Options Inc.


1-800-926-4468
1-772-873-9674


Home
Open Account
Margins
Contract Specs
Charts & Quotes
Education
Risk Disclosure
Links


 

 

 


10 Most Frequently Asked Questions

Click Here!






























 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

NYMEX Crude Oil Futures and Options Market Trading

 

Watch the Video>>How to Trade Crude Oil Futures and Options

 

 

 

Let's get started!

 Open Your New Account Now.          OR           Free Futures and Options Online Trading Demo

 

*The information contained within this webpage comes from sources believed to be reliable. No guarantees are being made to the content's accuracy or completeness.

 

Light Sweet Crude Oil Futures Market Trading

Crude oil futures are the world's most actively traded commodity, and the NYMEX Division light, sweet crude oil futures contract is the world's most liquid forum for crude oil future trading, as well as the world's largest-volume futures contract trading on a physical commodity. Additional risk management and trading opportunities are offered through options on the crude oil future contract; crack spread options on the pricing differential of heating oil future contracts vs. crude oil future contracts or unleaded gasoline futures contracts vs. crude oil futures. The NYMEX crude oil future contract may be the most important energy future contract in the world.

 

Crude Oil Futures and Options Quick Facts

  • 1,000 barrel contract

  • one cent move equals $10

  • trades every month

  • Crude oil futures symbol (CL)

 

Here is the brochure from the CME Group/NYMEX for WTI Crude oil futures and options.

WTI crude oil brochure

 

Geopolitical concerns in the Middle East can cause extreme volatility in the crude oil futures and options markets as well as the distillates such as unleaded gasoline and heating oil. Tensions with Iran are especially important to energy traders because Iran's daily crude oil production is estimated to be around 4 million barrels. They also have the potential to hinder or block the Straits of Hormuz with their navy which can cause major shipping delays. Approximately 20% of the world's oil passes through the straits making geopolitical tensions with Iran a critical factor in crude oil futures prices.

The crude oil futures contract trades in units of 1,000 barrels, and the delivery point is Cushing, Oklahoma, which is also accessible to the international spot markets via pipelines. The crude oil future contract provides for delivery of several grades of domestic and internationally traded foreign crude oils, and serves the diverse needs of the physical crude oil market.

 

During the September 11 terrorist attacks the NYMEX was destroyed but within days the crude oil futures and crude oil options markets were trading again. This is a testament to the strength and viability of the energy future markets and the commodity exchanges in the United States of America.

 

The Crude Oil Futures Contracts-Crude Oil Pricing

New York Mercantile Exchange Middle East crude oil future contract trades with prices quoted in dollars and cents per barrel ($00.00/bbl) and a contract unit of 1,000 barrels. The max/min price fluctuation rules are consistent with the Exchange's light, sweet crude oil future contract as are settlement procedures.

After the last day of regular trading, final settlement of the crude oil futures contract is based on cash settlement against the cumulative monthly average of the index over the course of the contract month. The calculation of the final crude oil futures settlement price is completed on the final business date of the contract month (e.g. October 30 for the October 1998 contract).

 

Are you a crude oil hedger? If so, click here to learn more.

 

Crude Oil Options on Futures Contracts Explained

A crude oil call option gives the purchaser the right but not the obligation to purchase the underlying futures contract for a specific time period and a specific price (strike price). Let's say that you wanted to purchase a February crude oil $50 call option and pay a premium of $1,900.

This means that you bought the right but not the obligation to buy 1,000 barrels of February crude oil for $50 per barrel. Of course, very few options are bought for the purpose of taking delivery but that is one potential outcome. Chances are that you either bought the crude oil option to hedge your price risk in the physical crude oil market (maybe you are a producer and own an oil well or you are a consumer and own a refinery) or you are speculating that crude oil prices will go higher in an attempt to make a profit.

A crude oil put option gives the purchaser the right but not the obligation to sell the underlying futures contract for a specific time period and a specific price. Let's say that you wanted to buy a February crude oil $40 put option and pay a premium of $1,150.

This means that you have the right but not the obligation to sell 1,000 barrels of February crude oil at $40 per barrel.

What is the delta factor?

The delta factor of an option represents the estimated percentage of change an option will receive based on the movements in the underlying futures contract.

Let's assume the February crude oil $50 call option above has a 30% delta factor. This means that if the underlying futures contract were to rally by $1,000, then the call option would accrue by approximately $300 or 30% of $1,000 in the crude oil futures contract.

What is theta?

Options are wasting assets which means that they lose value as time passes. The theta of an option is the measure of time decay.

Let's assume that you bought a February crude oil $50 call option with 60 days left until expiration. Let's also assume that the crude oil futures prices have moved very little over the last month and are exactly the same price 30 days later. Your option will have lost 30 days worth of time and therefore will be worth less today that it was when it had 60 days left until expiration.

What is vega?

Vega is a measure of the implied volatility of an option contract as it relates to its underlying futures contract. For instance, if the underlying futures contract is extremely volatile then the implied volatility of the options of that futures contract will be affected.

In a high implied volatility environment option premiums tend to expand. Conversely, in a low implied volatility environment the option premiums tend to decrease.

 

 

*Contract information changes from time to time. Please click here to see the most recent contract specifications and click here for the most recent trading hours.

 

Contract Specifications

Light, Sweet Crude Oil Future Contract

 

Trading Unit
Futures: 1,000 U.S. barrels (42,000 gallons).
Options: One NYMEX Division light, sweet crude oil futures contract.

Price Quotation
Crude Oil Futures and Options: Dollars and cents per barrel.

Trading Hours
Crude Oil Futures and Options: Open outcry trading is conducted from 9:00 A.M. until 2:30 P.M.

After hours crude oil futures trading are conducted via the GLOBEX internet-based trading platform beginning at 3:15 P.M. on Mondays through Thursdays and concluding at 9:30 A.M. the following day. On Sundays, the session begins at 6:00 P.M. All times are New York time.

Trading Months
Crude Oil Futures: 30 consecutive months plus long-dated crude oil futures initially listed 36, 48, 60, 72, and 84 months prior to delivery.

Additionally, crude oil futures trading can be executed at an average differential to the previous day's settlement prices for periods of two to 30 consecutive months in a single transaction. These calendar strips are executed during open outcry trading hours.

Crude oil options: 12 consecutive months, plus three long-dated options at 18, 24, and 36 months out on a June/December cycle.

Minimum Price Fluctuation
Crude oil Futures and Options: $0.01 (1) per barrel ($10.00 per contract).

Maximum Daily Price Fluctuation
Crude Oil Futures: $10.00 per barrel ($10,000 per contract) for all months. If any contract is traded, bid, or offered at the limit for five minutes, crude oil futures trading is halted for five minutes. When trading resumes, the limit is expanded by $10.00 per barrel in either direction. If another halt were triggered, the market would continue to be expanded by $10.00 per barrel in either direction after each successive five-minute trading halt. There will be no maximum price fluctuation limits during any one trading session.

Crude oil options: No price limits.

Last Trading Day
Crude Oil Futures: Trading terminates at the close of business on the third business day prior to the 25th calendar day of the month proceeding the delivery month. If the 25th calendar day of the month is a non-business day, crude oil futures trading shall cease on the third business day prior to the last business day proceeding the 25th calendar day.

Crude oil options: Trading ends three business days before the underlying futures contract.

Options Strike Prices
Twenty strike prices in increments of $0.50 (50) per barrel above and below the at-the-money strike price, and the next ten strike prices in increments of $2.50 above the highest and below the lowest existing strike prices for a total of at least 61 strike prices. The at-the-money strike price is nearest to the previous day's close of the underlying futures contract. Strike price boundaries are adjusted according to the crude oil futures price movements.

Margin Requirements
Margins are required for open crude oil futures or short options positions. The margin requirement for an options purchaser will never exceed the premium.

Trading Symbol
Futures: CL

 

 

Let's get started!

 Open Your New Account Now.          OR           Free Futures and Options Online Trading Demo

 

 

**Click Here Now! for actual crude oil futures and options, quotes, prices, expirations, charts .....

To see more about the energy futures visit unleaded gas futures, heating oil futures and natural gas futures.

Also visit Crude Oil Futures Special Report

 


SITE MAP

EDUCATION | PRIVACY POLICY | HOME
Copyright 2004-2015 TKFutures Inc. All Rights Reserved.

The information presented in this commodity futures and options site is not investment advice and is for informational purposes only. No guarantees are being made to its accuracy or completeness. This information can be considered a solicitation to enter into a derivatives trade. Investing in futures and options carries substantial risk of loss and is not suitable for some people. Past or simulated performance is not indicative to future results.