The History Of Oil Futures Trading In The US

A futures contract is a derivative financial instrument which permits the holder to buy or sell a preset quantity of an underlying commodity or security. The price that is paid or received is fixed in the futures contract and must be exercised by a specified date.

One of the most heavily traded of these derivative products is oil futures, as these are used by producers or buyers of oil to hedge risk, and are also used to make a profit by speculators. The history of oil futures trading in the US began with heating oil futures, and has expanded over the years to crude oil, and unleaded gasoline.

You can access information on oil and other commodity futures at online broker ETrade. You can also access investment advice, as well as research potential investments from your home or office computer.

History Of Oil Futures Trading In The US

The history of oil futures trading in the US began on the NYMEX in 1978 with heating oil futures. Heating oil futures were the first of the energy-related commodities or by-products to utilize futures trading. This was followed quickly by crude oil in 1983, and unleaded gasoline in 1984.

The heating oil futures contract traded on the NYMEX was the first successful attempt at trading futures on the energy market. At the time New York was the center of the financial world, and the physical location of the NYMEX contributed to its success. Oil futures trading also succeeded due to the never-before-seen volatility in oil prices occurring after the 1978 introduction of trading.

Several geographic events contributed to this volatility, and caused the producers and buyers of energy products to view oil futures contracts as an effective hedge against risk.

Over the last 25 years, daily average volume in oil futures on the NYMEX has grown considerably, as has the open interest for oil futures. Open interest is a tern that refers to the number of futures contracts that have been entered into, but not yet closed out by market participants.

Heating oil futures are also traded on the ICE Futures exchange, and has contracts that are similar to those found on the NYMEX. The NYMEX is the clear market leader, as its volume is larger than what is seen on the ICE Futures exchange.

History Of Oil Futures Trading In The US

The strategy you use in futures trading is important, and in order to implement an effective strategy an investor must not only understand the history of oil futures trading in the US, but also market trends. You can utilize futures trading analysis to try and find the winners and losers.

It is important to develop a strategy and stick with it, including identifying and exiting losing trades as quickly as possible. You must consider your investment objective, risk-tolerance, and current market volatility.

When you use this analysis you will increase your chances for success, as it prepares you for market volatility, and eliminates the element of surprise. Keep in mind that in futures trading, a commodity price can change rapidly, and as a futures trader you must stay on your toes.

Trading oil futures carries considerable risk, and is not for every investor. Consult with a professional financial adviser, such as the industry’s top professionals at online brokerage ETrade, to find out if trading oil futures is a good fit for your investment strategy.

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