Trading in physical barrels of oil
Under the term "oil trader", most people probably imagine a person who orders a supply of a certain amount of oil in barrels, and then proceeds to store it with a promise of selling it once the price rises, ending up in profit.
The possibility of trading in oil in this way does exist, but it is really cumbersome for a small investor / trader. The minimum order for crude oil in physical form is 1 contract, which is 1000 barrels of crude oil. Therefore, if you do not have a warehouse or a smaller fleet of tank trucks, we recommend considering other options for trading in oil.
Purchase of futures contracts
Trading oil through futures contracts means buying a future delivery of a certain amount of "black gold" in physical form, but with a predetermined expiration date (aka date of delivery). However, the actual delivery of oil barrels usually does not happen, because the principle of trading oil through futures contracts is to buy, wait for the price to rise and sell the futures contract before it expires. If you don't make it in time, then we recommend renting a warehouse.
Investments in oil shares
As we have already mentioned, oil extends to almost every corner of the global economy, so it is no wonder that the oil industry is made up of a huge number of conglomerations, companies and firms. Whether these are mining companies or oil refining companies, retail investors have the opportunity to participate in their potential success and invest in their shares.
Speculation through CFD contracts
A very popular method of trading oil is through so-called contracts for difference. These are contracts artificially created by the broker, the price of which is usually derived from the price of oil futures contracts.
In this case, the trader does not directly own the oil, nor does he commit himself to its future ownership, he only speculates on its price.
In addition, the entire CFD oil trading process takes place exclusively online through the so-called trading platform. The trader is thus not tied to any particular place and can also trade on a mobile phone, for example on the way to work.
Advantages of CFD oil trading:
It is possible to trade with smaller capital - of all the mentioned oil trading options, CFD contracts are among the most financially affordable. The minimum deposits here are around CZK 2,500 / EUR 100.
Leverage - Determines the ratio of the amount of capital you invest in a given trade to the funds provided to you by the broker. At Purple Trading, we offer 1:5 leverage for Brent crude oil trading (i.e. you can open a $ 500 trading position with $ 100) and 1:10 for WTI. This gives you a chance for higher profit when trading oil, but keep in mind that potential losses will also multiply.
The ability to speculate on the rise and fall of oil prices - with CFD contracts, you do not own physical barrels of oil, which means that not only you don’t need to be worried about falling prices, but you even have the opportunity to profit from it. Provided that you will estimate that the price will fall.