Crude Oil Spread Trading
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Where Can I Open a Crude Oil Spread Trading Account?
There are many spread trading companies which offer thousands of international markets such as commodities, like crude oil and gold, but also indices, foreign exchange and equities.
Some firms, such as Financial Spreads, provide the usual benefits of spread trading including two way, tax free* trading with zero commissions and the option of trading outside regular market hours.
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| Brent Crude Daily - Spread Size |
5† |
6† |
5 |
5† |
4 |
5† |
5† |
5† |
| Brent Crude Daily - Min Stake |
£1 |
$2 |
£1 |
£1 |
£0.5 |
£1 |
£1 |
£1 |
| Brent Crude Future - Spread Size |
5 |
6 |
6 |
5 |
6 |
5 |
5 |
5 |
| Brent Crude Future - Min Stake |
£1 |
$2 |
£1 |
£1 |
£0.5 |
£1 |
£1 |
£1 |
| US Crude Oil Daily - Spread Size |
5† |
4 |
5 |
5† |
4 |
5† |
5† |
5† |
| US Crude Oil Daily - Min Stake |
£1 |
$0.70 |
£1 |
£1 |
£0.5 |
£1 |
£1 |
£1 |
| US Crude Oil Future - Spread Size |
5 |
6 |
6 |
5 |
6 |
5 |
5 |
5 |
| US Crude Oil Future - Min Stake |
£1 |
$2 |
£1 |
£1 |
£0.5 |
£1 |
£1 |
£1 |
Comparison Notes
Advantages of Crude Oil Spread Trading
There are several advantages which spread trading holds over the typical methods of trading crude oil:
- Spread trading is tax free*. You do not take possession of any assets, you are simply speculating on the future price of a barrel of oil. This means spread traders do not pay income tax, capital gains tax or stamp duty*.
- Unlike traditional methods of trading crude oil, spread trading allows you to speculate on markets to go down as well as up. This provides added flexibility and allows you to trade in whichever direction your research suggests the oil market will move.
- Most spread trading companies do not charge broker’s fees or commissions on your trades, this can help keep trading costs down.
- Financial spread trading allows investors to trade a wide range of international markets and asset classes. You can trade both Brent Crude Oil and US Crude Oil contracts but you can also trade on gold, indices including the FTSE 100 and Dax 30, stocks and shares, foreign exchange and even bonds and interest rates from a single account.
Crude Oil Spread Trading Example
If you decide to spread trade on a market such as Brent Crude Oil then, on visiting a spread trading company's website, at the moment you would see the Brent Crude Oil (September) futures market priced at $75.18 - $75.23.
As a result, you can speculate on Brent Crude Oil settling:
- above $75.23, or
- below $75.18
On the expiry date for this market, 12-Aug-10.
As this is a futures market you should note that you can close your trade during market hours before the expiry date, however, the position will automatically close on the expiry date if it is still open.
When spread trading, investors trade on every unit the market moves up or down; with both the Brent Crude Oil and the US Crude Oil (WTI) markets a unit is 1¢ of the commodity's price movement.
For instance, you might decide to speculate £2 for every 1¢ Brent Crude Oil rises or falls.
Note that many spread trading firms also allow you to trade in Dollars or Euros, e.g. €x per 1¢.
Spread Trading on Crude Oil to Rise
If you bought the Brent Crude Oil (September) market at $75.23 and the commodity rose then you may decide to let your trade run to expiry. If that were to happen then the market might ultimately close on 12-Aug-10 with a price of $75.98. This would result in:
Profit or Loss = (closing price of the market - initial price of the market) x stake per 1¢
Profit or Loss = ($75.98 - $75.23) x £2 per 1¢ stake
Profit or Loss = $0.75 x £2 per 1¢
Profit or Loss = 75¢ x £2 per 1¢
Profit or Loss = £150 profit
The markets can of course fall, if the market spread was to drop to $74.52 - $74.57 before the expiry date, you could choose to close your position early to limit your losses. If so, you would sell your trade at $74.52.
Therefore, with the same £2 per 1¢ stake:
Profit or Loss = (closing price of the market - initial price of the market) x stake per 1¢
Profit or Loss = ($74.52 - $75.23) x £2 per 1¢ stake
Profit or Loss = -$0.71 x £2 per 1¢
Profit or Loss = -71¢ x £2 per 1¢
Profit or Loss = -£142 loss
Spread Trading on Crude Oil to Fall
One major advantage of spread trading is that you can sell the markets.
When we started this example, the Brent Crude Oil (September) price was $75.18 - $75.23.
If you were to sell at $75.18 and the market fell then the spread might change to $74.45 - $74.50. Assuming this was the case, you might decide to take your profits by closing your trade at $74.50 rather than letting it run to the expiry date.
Profit or Loss = (initial price of the market - closing price of the market) x stake per 1¢
Profit or Loss = ($75.18 - $74.50) x £2 per 1¢ stake
Profit or Loss = $0.68 x £2 per 1¢
Profit or Loss = 68¢ x £2 per 1¢
Profit or Loss = £136 profit
However, if the market were to rise to $75.77 - $75.82, you may decide to close your position to prevent further losses. If this were the case, you would buy at $75.82.
You would close your trade with the same £2 per 1¢ stake:
Profit or Loss = (initial price of the market - closing price of the market) x stake per 1¢
Profit or Loss = ($75.18 - $75.82) x £2 per 1¢ stake
Profit or Loss = -$0.64 x £2 per 1¢
Profit or Loss = -64¢ x £2 per 1¢
Profit or Loss = -£128 loss
Brent Crude Oil (September) market accurate as of 09-Jul-10. Expiry date for this market: 17:00 BST, 12-Aug-10.
Where can I Find Crude Oil Spread Trading Charts?
Many spread trading firms like Financial Spreads provide a variety of historical data and analysis, which includes candlestick charts, on nearly all of the financial markets they offer.
In particular you are able to make use of live crude oil spread trading charts that offer a variety of statistics including Moving Averages and Bollinger Bands.
You can typically alter these charts to show data over several time frames that range from hours or minutes to days or even weeks.
Crude Oil Spread Trading Companies – Account Services Comparison
The companies detailed below all provide crude oil spread trading markets and offer the usual benefits of spread trading such as a wide variety of markets, tax free trading*, no broker’s fees and two way trading.
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| Online Application |
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| Credit Account |
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| Deposit Account |
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| Stop Loss Available |
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| Automatic Stop Loss |
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| 24 Hour Trading |
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| FSA Authorised and Regulated |
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| Candlestick Charts |
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Comparison Notes
Crude Oil Spread Trading and Risk Management
You can get carried away when you start investing, particularly when thinking about the amount of money you might make. And making a profit is rarely seen as a bad thing. Still, investors have to remember that they won’t profit on every trade.
The one thing I always try to stress to anyone looking at the markets is that you can lose money. Naturally, as with all investing, be it on Stocks and Shares, pensions or buying barrels of crude oil, there is a downside and with spread trading you need to be careful because you can lose more than you initially invested.
It can be useful to think about some of the other areas which the following risk notice covers, "Spread trades carry a high level of risk. Before trading, ensure that spread trading matches your investment objectives. Familiarise yourself with the risks involved. Where necessary, seek independent advice".
Having said all that, you can put limits on your trades to help limit your losses without impacting your upside. To learn more see our feature on Stop Loss Orders.
Another option for reducing your risks is simply to trade with smaller stake sizes such as £1 per point or $1 per point. This is an all too often overlooked aspect of risk management and something any investor should bear in mind.
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Financial Spreads
"With FinancialSpreads.com you get all the normal
advantages of Spread Trading plus commission free trading on 2,000+ markets, 24 hour trading and..." read
Financial Spreads review.
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Risk Warning: Spread trading carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.
'Crude Oil Spread Trading' by DB, updated 17-May-12
For related pages also see:
Index Spread Trading, updated 17-May-12
Index Spread Trading - Where to open an Indices Spread Trading account, where to find Index spread trading charts, Indices risk management tips, stock market index spread trading examples and...read article: Index Spread Trading.
Commodities Spread Trading, updated 17-May-12
Commodities Spread Trading - Where to open a Commodities Spread Trading account, where to find Commodity spread trading charts, Commodities risk management tips, Commodities examples and...read article: Commodities Spread Trading.
Financial Spread Trading, updated 17-May-12
Financial Spread Trading - A look at where you can open a financial spread trading account, where to get live financial spread trading charts, risk management tips, spread trading examples and...read article: Financial Spread Trading.
Forex Spread Trading, updated 17-May-12
Forex Spread Trading - A look at where you can open a forex spread trading account, where to get live forex charts, forex risk management tips, trading examples and...read article: Forex Spread Trading.
Commodities Futures, updated 30-Apr-12
Commodities futures. Where to find Commodities real-time prices and charts, how to trade the Commodities markets and the most popular Commodities futures questions plus...read article: Commodities Futures.
FTSE Futures, updated 30-Apr-12
FTSE futures. Where to find FTSE real-time prices and charts, how to trade the FTSE index and the most popular stock market futures questions on FTSE plus...read article: FTSE Futures.
Dow Futures, updated 30-Apr-12
Dow futures. Where to find Dow real-time prices and charts, how to trade the Dow index and the most popular stock market futures questions on Dow plus...read article: Dow Futures.
S&P 500 Futures, updated 30-Apr-12
S&P 500 futures. Where to find S&P 500 real-time prices and charts, how to trade the S&P 500 index and the most popular stock market futures questions on S&P 500 plus...read article: S&P 500 Futures.
DAX Futures, updated 30-Apr-12
DAX futures. Where to find DAX real-time prices and charts, how to trade the DAX index and the most popular stock market futures questions on DAX plus...read article: DAX Futures.
Gold Futures, updated 30-Apr-12
Gold futures. Where to find Gold real-time prices and charts, how to trade the Gold market and the most popular commodities futures questions on Gold plus...read article: Gold Futures.
Crude Oil Futures, updated 30-Apr-12
Crude Oil futures. Where to find Crude Oil real-time prices and charts, how to trade the Crude Oil market and the most popular commodities futures questions on Crude Oil plus...read article: Crude Oil Futures.
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