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Why Buying Oil Futures Is So Lucrative

buying oil futures

Investors can profit from the shocking rise in oil prices by buying oil futures. These legally binding financial instruments specify the time and amount of oil that will be delivered. Typically, an oil futures contract involves the purchase of 1,000 barrels of crude oil. There is one part of a futures contract that can vary. The price is specified before buying the contract, but the market value of this commodity may rise or fall between the time of purchase and the time of delivery. An investor can sell the future contract before delivery in order to achieve a good return due to the changed price of the commodity.

The Details About Buying Oil Futures

You do not need to be an investor at a large investment institution to take part in buying oil futures. Even day traders and other independent traders can buy and sell oil futures. The main reason for this is the small amount of money needed to leverage a large instrument like an oil futures contract. It just takes a small fraction of the actual cost of the commodity to control a contract.

As with other futures contracts, buying oil futures also enjoys a high level of liquidity in the market. Because there are so many buyers available, it is not hard to find one if an investor wishes to sell an oil future ahead of delivery time. In fact, this is what futures investors usually do. They take advantage of a higher market price for their commodity and sell futures for profit before they are delivered.

The most lucrative sectors are often the ones that see high levels of change. While much of the world sees the rise in oil prices as negative, an investor can use it to his or her advantage. Buying oil futures enables investors to gain something from the soaring prices of oil.

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