Heating Oil Futures Trading Basics

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Top Binary Options Broker 2020!
    Perfect For Beginners and Middle-Leveled Traders!
    Free Education How To Trade!
    Free Demo Account!
    Big Sign-up Bonus!

  • Binomo
    Binomo

    Good Choice For Experienced Traders!

Contents

Heating Oil Futures Trading Basics

Monday, April 6, 2020 : NYMEX Heating Oil (Ultra Low Sulfur Diesel) Price for May delivery closed down $0.0 249 at $ 1.0457 per gallon.

See our special offer for new subscribers.

Click on graph for larger image.
Click on graph for larger image.

Heating Oil

Trading Unit
Heating Oil Futures: 42,000 U.S. gallons (1,000 barrels).

Heating Oil Options: One NYMEX Division heating oil futures contract.

Trading Hours
Futures and Options: 9:50 A.M. to 3:10 P.M., for the open outcry session.

After-hours trading is conducted via the NYMEX ACCESS® electronic trading system from 7 P.M. to 9 A.M. on Sundays and 4 P.M. to 9 A.M., Mondays through Thursdays. All times are New York time.

Trading Months
Heating Oil Futures: Trading is conducted in 18 consecutive months commencing with the next calendar month (for example, on October 2, 1998, trading occurs in all months from November 1998 through April 2000).

Options: 18 consecutive months.

Price Quotation
Heating Oil Futures and Options: In dollars and cents per gallon: for example, $0.5277 (52.77ў) per gallon.

Minimum Price Fluctuation
Heating Oil Futures and Options: $0.0001 (0.01ў) per gallon ($4.20 per contract).

Maximum Daily Price Fluctuation
Heating Oil Futures: Initial limits of $0.06 (6ў) per gallon are in place in all but the first two months and rise to $0.09 (9ў) per gallon if the previous day’s settlement price in any back month is at the $0.06 per gallon limit. In the event of a $0.20 (20ў) per gallon move in either of the first two contract months, limits on all months become $0.20 per gallon from the limit in place in the direction of the move following a one-hour trading halt.

Options: No price limits.

Last Trading Day
Heating Oil Futures: Trading terminates at the close of business on the last business day of the month preceding the delivery month.

Options: Trading ends three business days before the
underlying futures contract.

Exercise of Options
By a clearing member to the Exchange clearinghouse not later than 5:30 P.M., or 45 minutes after the underlying futures settlement price is posted, whichever is later, on any day up to and including the option’s expiration.

Options Strike Prices
Twenty strike prices in one-cent-per-gallon increments above and below the at-the-money strike price, and the next ten strike prices in five-cent increments above the highest and below the lowest existing strike prices for a total of at 61 strike prices. The at-the-money strike price is the nearest to the previous day’s close of the underlying futures contract. Strike price boundaries are adjusted according to the futures price movements.

Delivery
Heating Oil is F.O.B. seller’s facility in New York Harbor, ex-shore. All duties, entitlements, taxes, fees, and other charges paid. Requirements for seller’s shore facility: capability to deliver into barges. Buyer may request delivery by truck, if available at the seller’s facility, and pays a surcharge for truck delivery. Delivery may also be completed by pipeline, tanker, book transfer, or inter- or intra-facility transfer. Delivery must be made in accordance with applicable federal, state, and local licensing and tax laws.

Delivery Period
Deliveries may only be initiated the day after the fifth business day and must be completed before the last business day of the delivery month.

Alternate Delivery Procedure (ADP)
An Alternate Delivery Procedure is available to buyers and sellers who have been matched by the Exchange subsequent to the termination of trading in the spot month contract. If buyer and seller agree to consummate delivery under terms different from those prescribed in the contract specifications, they may proceed on that basis after submitting a notice of their intention to the Exchange.

Exchange of Futures for, or in Connection with, Physicals (EFP)
The commercial buyer or seller may exchange a futures position for a physical position of equal quantity by submitting a notice to the Exchange. EFPs may be used to either initiate or liquidate a futures position.

Grade and Quality Specifications
Generally conforms to industry standards for fungible No. 2 heating oil.

Inspection
The buyer may request an inspection for grade and quality or quantity for all deliveries, but shall require a quantity inspection for a barge, tanker, or inter-facility transfer. If the buyer does not request a quantity inspection, the seller may request such inspection. The cost of the quantity inspection is shared equally by the buyer and seller. If the product meets grade and quality specifications, the cost of the quality inspection is shared jointly by the buyer and seller. If the product fails inspection, the cost is borne by the seller.

Position Limits
7,000 contracts for all months combined, but not to exceed 1,000 in the last three days of trading in the spot month or 5,000 in any one month.

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

Trading Symbols
Futures: HO
Options: OH

Compare Brokers For Trading Heating Oil

For our trading heating oil comparison, we found 9 brokers that are suitable and accept traders from Russian Federation.

We found 9 broker accounts (out of 147) that are suitable for Trading Heating Oil.

Plus500

Spreads From

What can you trade?

  • Forex
  • Crypto currencies
  • Indices
  • Commodities
  • Stocks
  • ETFs

About Plus500

Platforms

  • MT4
  • MT5
  • Web Trader
  • Mobile App

Funding Methods

  • Credit cards
  • PayPal
  • Bank transfer

76.4% of retail CFD accounts lose money

AvaTrade

Spreads From

What can you trade?

  • Forex
  • Crypto currencies
  • Indices
  • Commodities
  • Stocks
  • ETFs

About AvaTrade

Platforms

  • MT4
  • MT5
  • Web Trader
  • Mobile App

Funding Methods

  • Credit cards
  • PayPal
  • Bank transfer

71% of retail investor accounts lose money when trading CFDs with this provider.

Spreads From

What can you trade?

  • Forex
  • Crypto currencies
  • Indices
  • Commodities
  • Stocks
  • ETFs

About IG

Platforms

  • MT4
  • MT5
  • Web Trader
  • Mobile App

Funding Methods

  • Credit cards
  • PayPal
  • Bank transfer

68% of retail investor accounts lose money when trading spread bets and CFDs with this provider

Read our in-depth IG review

Forex.com

Spreads From

What can you trade?

  • Forex
  • Crypto currencies
  • Indices
  • Commodities
  • Stocks
  • ETFs

About Forex.com

Platforms

  • MT4
  • MT5
  • Web Trader
  • Mobile App

Funding Methods

  • Credit cards
  • PayPal
  • Bank transfer

69% of retail investor accounts lose money when trading CFDs with this provider

Axitrader

Spreads From

What can you trade?

  • Forex
  • Crypto currencies
  • Indices
  • Commodities
  • Stocks
  • ETFs

About Axitrader

Platforms

  • MT4
  • MT5
  • Web Trader
  • Mobile App

Funding Methods

  • Credit cards
  • PayPal
  • Bank transfer

68.5% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

City Index

Spreads From

What can you trade?

  • Forex
  • Crypto currencies
  • Indices
  • Commodities
  • Stocks
  • ETFs

About City Index

Platforms

  • MT4
  • MT5
  • Web Trader
  • Mobile App

Funding Methods

  • Credit cards
  • PayPal
  • Bank transfer

72% of retail investor accounts lose money when trading CFDs with this provider

EasyMarkets

Spreads From

What can you trade?

  • Forex
  • Crypto currencies
  • Indices
  • Commodities
  • Stocks
  • ETFs

About EasyMarkets

Platforms

  • MT4
  • MT5
  • Web Trader
  • Mobile App

Funding Methods

  • Credit cards
  • PayPal
  • Bank transfer

83% of retail investor accounts lose money when trading CFDs with this provider.

SpreadEx

Spreads From

What can you trade?

  • Forex
  • Crypto currencies
  • Indices
  • Commodities
  • Stocks
  • ETFs

About SpreadEx

Platforms

  • MT4
  • MT5
  • Web Trader
  • Mobile App

Funding Methods

  • Credit cards
  • PayPal
  • Bank transfer

67% of retail investors lose money when trading spread bets and CFDs with this provider.

Admiral Markets

Spreads From

What can you trade?

  • Forex
  • Crypto currencies
  • Indices
  • Commodities
  • Stocks
  • ETFs

About Admiral Markets

Platforms

  • MT4
  • MT5
  • Web Trader
  • Mobile App

Funding Methods

  • Credit cards
  • PayPal
  • Bank transfer

83% of retail investor accounts lose money when trading CFDs with this provider

Between 54-87% of retail CFD accounts lose money. Based on 69 brokers who display this data.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Top Binary Options Broker 2020!
    Perfect For Beginners and Middle-Leveled Traders!
    Free Education How To Trade!
    Free Demo Account!
    Big Sign-up Bonus!

  • Binomo
    Binomo

    Good Choice For Experienced Traders!

The Ultimate Guide to

What Is Heating Oil?

Derived from petroleum (and thus from crude oil), heating oil is a low viscosity oil. Though it is similar to the oil used in diesel engines, as its name indicates, heating oil is primarily used in boilers and other heaters in both domestic and commercial properties. Often referred to simply as ‘HHO’, it is in wide use throughout the globe. The heating oil industry is worth around $34 billion annually, though industry statistics from IBIS indicate that this industry has shrunk by -4.4% over the past year. The biggest producers of heating oil are Russia, Saudi Arabia and the US, whilst the biggest consumers are the US, China and Japan.

2: Fundamental Influences Of Heating Oil:

Fuel is required in many households on a seasonal basis: in Ireland, oil providers such as EMO report that demand for heating oil is higher during the winter months where more energy is required to heat homes and commercial properties. When deployed in factories and heavy industry, however, heating oil is required consistently throughout the year.

Political ties with key oil producing countries such as the US and Russia can dramatically influence the cost of heating oil. One key example to examine currently is Venezuela; consistently one of the top 10 oil producers in the world, Venezuela’s current political troubles are disrupting its ability to supply oil to the rest of Latin America and beyond.

3: How Is Heating Oil Traded?

Heating oil is traded as a viscous liquid. When condensed, it is known as ‘petroleum jelly’ and this is a different product entirely. Heating oil needs to be kept in tanks with specific safety requirements: it is a criminal offence to store heating oil in an inadequate tank. Heating oil can be sold via representatives, on the spot market, or as a futures or options contract. A CFD (Contract for Difference) and certificates are two other options when it comes to trading heating oil.

The most popular forms for trading heating oil, and indeed any type of oil, are Brent Crude and WTI. Brent Crude is deployed worldwide as a benchmark for classifying oil. Brent Crude oil is known as ‘sweet’ (i.e. low in sulphur) and ‘light’ (i.e. relatively low in density). West Texas Intermediate (WTI) is a similar benchmark, and it is also used worldwide. WTI crude oil is also classified as ‘sweet and light’, though it is substantially lighter and sweeter than Brent Crude oil.

5: Advantages Of Trading Heating Oil As A CFD

One of the main advantages of trading Heating Oil as a CFD vs a Futures contract is the required capital, as Futures contracts are designed for large corporation and institutional traders, the required capital reflects this requirement. However, trading Heating Oil as a CFD with a broker like Plus500, drastically reduces the capital requirements using leverage. Plus500 offer leverage up to 1:152 on Heating Oil CFD’s which means that a trader can open a £15,200 position in Heating Oil with a £100 account size. It is important to note however, leverage can work both ways and amplify both losses and profits.

6: Spot Heating Oil vs Heating Oil Futures

Whether you trade on the spot market or as part of a futures contract will depend on the way in which you balance the difference between these two forms of trading. The key differences are outlined below:

Trading heating oil on the spot market:

  • A lower capital requirement
  • Trades are completed instantly
  • Traders can access larger trading volumes

Trading heating oil futures:

  • Only a marginal value is initially invested
  • The heating oil futures market is more liquid than the spot marker
  • Futures are better for managing risk

Alternative Commodities To Heating Oil

Why Choose Plus500
For Trading Heating Oil?

Plus500 scored best in our review of the top brokers for trading heating oil, which takes into account 120+ factors across eight categories. Here are some areas where Plus500 scored highly in:

  • 10+ years in business
  • Offers 2,000+ instruments
  • A range of platform inc. Web Trader, Tablet & Mobile apps
  • 24/7 customer service
  • Tight spreads from 0.60pips
  • Used by 300,000+ traders.
  • Offers demo account
  • 1 languages

Plus500 offers one way to tradeCFDs. If you wanted to trade HEATINGOIL

The two most important categories in our rating system are the cost of trading and the broker’s trust score. To calculate a broker’s trust score, we take into account a range of factors, including their regulation history, years in business, liquidity provider etc.

Plus500 have a B trust score. This is largely down to them being regulated by Financial Conduct Authority (FRN 509909) and Cyprus Securities and Exchange Commission (License No. 250/14). Plus500AU Pty Ltd (ACN 153301681), licensed by: ASIC in Australia, AFSL #417727, FMA in New Zealand, FSP #486026; Authorised Financial Services Provider in South Africa, FSP #47546, segregating client funds, being segregating client funds, being established for over 10

Trust Score comparison

Plus500 AvaTrade IG
Trust Score B AAA AAA
Established in 2008 2006 1974
Regulated by Financial Conduct Authority (FRN 509909) and Cyprus Securities and Exchange Commission (License No. 250/14). Plus500AU Pty Ltd (ACN 153301681), licensed by: ASIC in Australia, AFSL #417727, FMA in New Zealand, FSP #486026; Authorised Financial Services Provider in South Africa, FSP #47546 Central Bank of Ireland, ASIC, IIROC, FSA, FSB, UAE and BVI Financial Conduct Authority and ASIC
Uses tier 1 banks
Company Type Private Private Private
Segregates client funds

A Comparison of Plus500 vs. AvaTrade vs. IG

Want to see how Plus500 stacks up against AvaTrade and IG? We’ve compared their spreads, features, and key information below.

WHAT INFLUENCES OIL FUTURES TRADING MOST OF ALL.

Oil futures are consistently among volatility leaders on the Moscow Exchange forward market. On an average trading day, the trading volume reaches 400 thousand executed contracts on the amount of RUB 20 billion (not million!) and more.

In this article:

  • what oil futures is
  • why the oil futures market is so attractive among traders
  • pros and cons of oil futures trading
  • how to start trading oil futures
  • and in conclusion – a harmful advice – how to lose money trading oil on the forward market

Start to use ATAS absolutely free of charge! The first two weeks of use of the platform give access to its full functionality with 7-day history limit.

WORLD PRODUCTION OF OIL

According to recent information from the International Energy Agency, the world volume of oil production exceeded 100 million barrels per day. If we take USD 70 for one barrel, a commodity value of USD 7 billion is extracted from the Earth interior every 24 hours. But what is interesting …

The world oil market is even more large-scaled! This is connected with the fact that numerous oil derivatives circulate in the modern financial markets. Oil derivatives are exchange-traded derivative instruments, quotations of which correlate with oil prices. Most certainly, the most popular derivative is the oil futures.

What a futures is – read in this article.

Why the oil futures market is attractive for traders

  • Minimum spread and maximum liquidity. Practically, at any moment of time, there is an army of sellers in the market, who would be ready to sell you an oil futures one cent higher than the current price. The same is true for an army of buyers at one cent lower than the current price.
  • High volatility. During less than 3 months, starting from the middle of August 2020, an oil futures went up in price by 20% and then went down by 20%. Add wide day fluctuations to this whipsaw. Isn’t it a volatility any trader dreams about?
  • Relatively low cost of the market entry (depending on the exchange).
  • Information background is not boring. The oil futures price is pushed both ways by the news from all over the world every day. We will speak about a fundamental analysis of oil futures a bit later.
  • High status.“What are you doing for living? – Trading oil. – Wow!”

Types of oil futures

Oil futures could be divided by different criteria

  • by oil brand
  • by expiration term
  • by type – deliverable and non-deliverable. For example, they trade non-deliverable Brent oil futures (code – BR**) on the Moscow Exchange. And they trade oil products futures with delivery by railroad on the Saint-Petersburg Exchange.
  • by the contract currency. The vast majority of oil futures is quoted in USD. But a milestone event took place in March 2020 against a backdrop of economic conflict between the USA and China. Oil futures trading in CNY was started, for the first time, on the Shanghai International Energy Exchange.

Let us consider such features as oil brand and expiration term in more detail.

First of all, differences between various oil futures are due to the fact that the oil could be different (by the way, despite the fact that oil is called “black gold”, its color spectrum could be from black to yellow).

There are two most popular marker brands of oil:

  1. Brent North Sea Crude (better known as Brent Crude and named after a deposit in the North Sea).
  2. West Texas Intermediate (better known as WTI). Another name is Light Sweet Crude Oil.

Brent refers to the oil that is produced on the North Sea deposits. The Brent oil price is a benchmark for African, European and Middle East oils. The Brent pricing mechanism imposes the cost of about two thirds of the world volume of oil production. Sulphur content in Brent is 0.37%.

WTI is a basic brand for the North America. WTI sulphur content is about 0.24%. WTI is the best crude oil brand for production of petrol, while Brent is the best for production of diesel. WTI price is a bit lower than the Brent one.

Asian countries, when assessing own crude oil, use, as a rule, a mix from Brent and WTI prices, however, a difference between them is not big and the correlation, practically, tends to 100%, as you can see in the picture below.

Several words about the oil futures lifetime.

While expiration date of such instruments as Gazprom or Sberbank stock futures takes place once in a quarter, expiration in the oil futures market takes place every month.

Where an oil futures is traded

Main exchange platforms where oil futures are traded:

  • New York Mercantile Exchange (NYMEX), which is a subdivision of the Chicago Mercantile Echange (CME). Volume of trading Light Sweet Crude Oil (CL) futures was more than 310 million contracts in 2020 (+12% to the year 2020 indicator).
  • Intercontinental Exchange ICE.
  • Moscow Exchange (MOEX). Both Brent oil and Crude Sweet WTI (starting from the spring of 2020) futures are traded in the forward market. But, as it was already mentioned above, Brent is much more popular.

HOW TO START TRADING OIL FUTURES

The mechanism is simple and is not different from entering into other instruments trading:

  1. To choose an exchange and a broker.
  2. To make a contract with the broker.
  3. Install software. Usually, a broker provides the required software, but this software often lacks useful “tricks”. That is why professionals install additionally some specialized trading and analytical platforms in order to increase efficiency and convenience.
  4. Put money on the account.
  5. Start trading, following the trading system regulations (for example, oil futures trading with the use of footprints).

A size of a guarantee collateral could become a key factor when choosing an exchange, which you should enter to start the oil futures trading. In order to perform trading operations with one oil futures contract on the Moscow Exchange, a trader needs to have 10-12% of the cost of a lot consisting of 10 contracts, which is about USD 80, on his broker’s account.

And in order to trade E-mini Crude Light on NYMEX, a trader needs to have USD 500 on this account for intraday operations. In case a trader wants to postpone the position “overnight”, this could cost by far more than an intraday guarantee collateral.

Please note that the mentioned tariffs are just an example. Contact your broker and check exchange specifications for more accurate information. Clarify all existing exchange, bank and broker’s commission payments.

WHAT INFLUENCES THE OIL FUTURES PRICE

The oil futures market is very complex from the point of view of fundamental analysis due to its global nature and importance for the modern economy. The reason is that the oil price is sensitive to a huge number of political, economic and other factors.

Let us list the basic drivers of the oil futures price in grief:

  • Industrial production demand. At the time of writing this article, the biggest oil consumer is the USA. However, if the Chinese economy develops at the same rate, China will become the biggest importer of black gold in 2020.
  • OPEC (Organization of the Petroleum Exporting Countries). Decisions of this organization, which was created in order to control oil production quotas, and also news from other oil producing countries, which are not OPEC members, cause significant oil price fluctuations.
  • Geopolitical conflicts and wars. As an example are sanctions against Iran.
  • Statistical data publication. Dynamics of reserves and reports of oil producing companies.
  • Currency market fluctuations. Increase of the USD index exerts pressure on the oil futures price.
  • Emergencies, such as windstorms, earthquakes and industrial accidents.
  • Other fundamental factors and also rumors, forecasts of analysts and expert articles in business media.

By the way, have you paid attention to the fact that bursts of optimism in the news often coincide with the market peaks, which are followed by a significant price decrease? Below is a fresh example:

Positive news, which were connected with the oil futures market, were in the top of search systems in the beginning of October:

  • CNBC: OPEC ‘powerless to prevent’ oil prices jumping toward $100 a barrel this year;
  • Fortune: The price is at a 4-year maximum and may go even higher as investors observe inability of OPEC to replace the falling export of Iran oil.

However, something went wrong. And, from the 86.38 peak on October 5, the oil futures on the Moscow Exchange went down to the 82.65 minimum on October 8. And, after an unsuccessful attempt to rally on October 9, the oil futures price slid down.

We hesitate to make the flat assertion of what it is: a coincidence or information manipulation on the market peak. In any case, one example like this is insufficient to deny importance of fundamental analysis in the oil futures market.

However, if a beginner trader tends to trade on the basis of fundamental analysis, will he be able to see into nuances of the Persian Gulf geopolitics, changes of crude oil reserves in the USA and so on? Unlikely. As a result, a loss is more probable than gain.

However, there is one more way to “burn” your trading account in no time. We will tell you a story.

“ HARMFUL ADVICE ” . HOW TO LOSE A DEPOSIT TRADING OIL FUTURES

A story about trading against the trend. We will speak about the oil drop in October 2020, which we mentioned above already.

Look at the chart, which shows dynamics of the oil futures price on the Moscow Exchange with the 30m timeframe.

Light-violet indicators are the market profiles. You can build practically any profile in the ATAS platform with the help of the Market Profile drawing instrument – just circle the required area of the chart with the mouse.

The chart also has:

  • a volume indicator with the sliding average MA=100;
  • a Delta indicator (what Delta is).

Now then. The oil futures went down from USD 80 to USD 76 on October 23. Take heed of the Market Profile readings. The indicator recorded a high volume at the USD 78 level during a steep fall of the price. It is a result of the fight of sellers and buyers. The latter were completely preoccupied and the contract price kept on decreasing. As a rule, a peak on the horizontal volume serves further as a resistance level.

The price found support at the 75.50 level during the next three trading sessions from October 24 to October 26. “This is a double bottom and the oil futures will go up!” – this is how, most likely, the beginners in the cunning financial markets thought.

The price was higher than USD 77 a barrel on October 27, inspiring optimism. “A new bullish trend has started!” They hurried to enter into longs with such bright thoughts, while the price was still not very far (as they thought) from the assumed bottom of 75.50.

But there are 2 facts, which professional oil futures traders do not miss:

  1. Resistance level 78, built on the Market Delta indicator readings, is not broken yet. Which gives grounds to assume that the downward trend could resume.
  2. Low trading volumes on October 27. The chart bars exceed the sliding average MA=100 few times only during the whole session. Why? Maybe, because buyers do not push. What if the major traders are not interested in higher prices? Maybe, they are just watching how the market would behave under the resistance of 78? Then we should see a wave of sales, which would confirm weakness of the demand.

This wave comes in the middle of the day on October 30. It is worthy of note that volumes grow, testifying to the deficit of buyers at USD 77 and higher. The wave of sales finds support again at the level of 75.50.

“Well, now it will go up for sure!” Inexperienced buyers built up the quantity of longs on opening on October 31.

However, more experienced traders were aware of the actual market weakness under the resistance level of 78 and chose bearish behavior on the last day of October. They acted so along the trend, making decisions on the basis of demand and supply, which could be analyzed with the help of professional instruments of the ATAS platform.

And what about the beginners? The price of oil futures reached USD 73 a barrel on November 1. Very few longs, opened at the support of 75.50, stayed alive until that moment. And those, who stayed alive, regretted.

Summary

  • the oil futures are an extremely volatile and liquid market;
  • the fundamental analysis is very complicated due to a big number of influence factors;
  • the use of modern instruments allows oil futures market analyzing with high efficiency.

Download a free test version of ATAS right now and analyze the state of the oil futures market on the Moscow Exchange as early as in 10 minutes.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Top Binary Options Broker 2020!
    Perfect For Beginners and Middle-Leveled Traders!
    Free Education How To Trade!
    Free Demo Account!
    Big Sign-up Bonus!

  • Binomo
    Binomo

    Good Choice For Experienced Traders!

Like this post? Please share to your friends:
Binary Options Trading, Strategies and Robots
Leave a Reply

;-) :| :x :twisted: :smile: :shock: :sad: :roll: :razz: :oops: :o :mrgreen: :lol: :idea: :grin: :evil: :cry: :cool: :arrow: :???: :?: :!: