If you are looking to trade oil futures contracts, you will be required to open an account with a registered commodities futures dealer. You will also need to learn a different trading system, and new terminology. In light of these inconveniences, you may be wondering can I trade oil futures in a stock?
While you can’t trade the actual contracts in a stock, you can trade the equivalent to oil futures in a traditional brokerage account, such as your ETrade or Zecco account, through the use of oil ETFs, oil matching funds, and other financial instruments.
Investing in crude oil futures as well as other financial instruments based on crude oil prices and futures, carry significant risk, and may not be right for every situation. Consult with a trusted financial adviser before investing any capital.
Can I Trade Oil Futures In A Stock? Crude Oil ETFs
If you are asking the question, “can I trade oil futures in a stock?”, you may want to look into crude oil ETFs. These exchange traded funds track the price of crude oil using the futures market to provide the value behind the fund.
When you utilize crude oil ETFs to trade oil, you are trading oil futures one level removed. The sponsor company behind the ETF purchases and sells the cruse oil futures so that the value of the ETF matches the change in oil prices as stated in the fund’s objectives.
There are currently a dozen ETFs that permit investors to trade the value of crude oil. Investors who are looking for an opportunity to invest in a fund that will rise in tandem with the price of crude have several ETF options.
Crude oil ETFs use the futures market as well as various crude oil contracts to achieve its objectives. You should always compare the returns of the fund versus the actual price of crude oil, to find the appropriate fund for your investment objectives.
Can I Trade Oil Futures In A Stock? Inverse And Leveraged ETFs
When you trade futures, you can also profit from falling oil prices. With an inverse oil ETF, you can have the same opportunities that you would find in the stock market to realize a profit from falling prices. The daily value of an inverse oil ETF will amount in the opposite direction of the price of crude petroleum.
A leveraged oil ETF is designed to provide two times the daily value change of crude oil. If oil rises 1%, the leveraged oil ETF will rise by 2%, and the leveraged inverse oil ETFs will fall by 2%. These leveraged oil ETFs are not suitable for long-term investments, and can be better suited for short-term trading.
Trading inverse and leveraged ETFs carries the considerable risk of loss, and should be used under the guidance of a professional financial adviser. As the price of oil is highly volatile, the losses seen using either of these strategies could be extreme.
Work closely with your financial adviser, such as the trained investment specialists at ETrade, to develop a strategy for investing in oil futures that is right for you.
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