Crude futures are contracts during which you comply with exchange a group amount of oil at a group price on a group date. they’re traded on futures exchanges, and are the foremost commonly used method of shopping for and selling oil. while oil importers and exporters use futures to insure against the adverse effects of oil price volatility,
Traders can use them to take a position on oil without purchasing or selling the commodity itself. That’s because the costs of oil futures will move because the value of oil goes up or down.
So rather than buying oil, storing it, expecting its price to extend then selling it on and arranging for it to be delivered, you’ll buy a derivative instrument then sell the contract before it expires. In doing so, you’re taking advantage of an equivalent increase in price without an equivalent logistical effort.
An oil option is analogous to a derivative instrument , but with one key difference. With an oil option, you’ve got a right to shop for a group amount of oil before a group date at a group price – but no obligation to trade if you don’t want to. option contracts also provide a way of trading on the worth movements of oil without having to require any delivery of the commodity itself.
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