Oil is the most widely traded commodity but for the average investor, there are the obvious impracticalities of storing barrels of oil. So how can we invest?
Photo Credit: Paul Keith Photo, Flickr
Option 1 – The Futures Market
The futures market could be the best option for many investors and speculators. There are many advantages to using the futures market. Firstly, oil futures are traded on margin which means you don’t have to put up the full price of the contract, only the margin requirement and the maintenance requirement. Typically the margin requirement for 1 standard oil future contract, which is worth around $90,000 currently, is around $4000. The maintenance could get quite oil is price goes against your position.
Other things to consider with the futures market is oil futures can go into backwardisation and contango. Contango is where contracts that have a longer expiry are a higher price than the near months. Backwardisation is the opposite. If you want to go long on oil, you can make an addition return from backwardisation, however the reverse is true if they are in contango.
Option 2 – Oil ETFs
Oil ETFs are another option to consider. They require no knowledge of any of the financial markets. However, they are not guaranteed to follow the price of oil. Many of them in the past have not tracked it well at all and left investors disappointed.
Option 3 – The Forex Market
The Forex Market is another option. Canada supplies America with a lot of it’s oil. As a result of this the currency pair USD/CAD has had a close long term inverse correlation with oil. This means when oil has gone up, USD/CAD has gone down. Another pair that has close correlation is CAD/JPY.
Option 4 – Oil Stocks
The stocks of the major oil companies are closely correlated to the price of oil. They can be a very useful way to invest in oil. They can be purchased through a stock broker. Many CFD brokers allow you to trade oil stocks on margin, however this will usually involve financing costs.
This article was written by Peter Marsden who runs a site about Futures Trading
If you like our articles, please consider signing up for our RSS!
I like the picture Jude
Flickr sure has alot of quality photos. Well done Yahoo
All these are very nice reviews. I was looking the same but there was not any proper resource, thanx now I Thank to the post.I really loved reading your blog.It was very well authored and easy to understand.
Happy New Year and some prosperity to all, I love the comments about the Oil investment. Will try myself to buy a contract in the terms you have mentioned here.
I got the link to your site from a friend of mine and I am very happy with the information I find here.
Yours
Walter
[...] 4 Ways To Invest In Oil — No Bullshit Investment Community 4 Dec 2007. Other things to consider with the futures market is oil futures. Will try myself to buy a contract in the terms you have mentioned here. 4 Ways To Invest In Oil — No Bullshit Investment Community [...]
I am very enjoyed for this site. Its an informative topic. It help me very much to solve some problems. Its opportunity are so fantastic and working style so speedy. I think it may be help all of you. Thanks a lot for enjoying this beauty article with me. I am appreciating it very much! Looking forward to another great article. Good luck to the author! all the best!
Dez Bryant Jersey
I had a desire to begin my own organization, but I did not have got enough amount of money to do that. Thank God my close colleague proposed to use the credit loans. Therefore I received the financial loan and made real my desire.
Awesome picture. All readers will definitely like this post. I appreciate your hard work. Keep it up!
Great write-up, I am a big believer in commenting on blogs to assist the weblog writers know that they’ve added one thing worthwhile to the world large net! Anyway, in my language, there aren’t a lot good source like this.
It’s good to see this information in your post, I was looking the same but there was not any proper resource, thanx now I Thank to the post.I really loved reading your blog.It was very well authored and easy to understand.
I really appreciate your post. It gives an outstanding idea that is very helpful for all the people on the web. Thanks for sharing this information.And I’ll love to read your next post too. Regards: optiontips.in
optiontips.in
Great post. All readers will definitely like this post. Thanks for sharing such useful information.
This is a proof that there are still undiscovered kingdom which existed along time ago. Ancient people were really great followers of the creator.
Every body admits that life seems to be expensive, however some people need money for various issues and not every man earns big sums cash. Hence to receive fast credit loans and just credit loan will be a proper solution.
the fashion Asics autralia outlet.
Groovy broadcast.This is a majuscule business. I like this substance.This situation has lots of welfare. I saved many fascinating things from this position. It helps me galore off..So i deprivation both information for distribution this surface with some of my associate.
computer store