Crude Oil as a Commodity: Futures & Options

Crude oil is the world's most actively traded commodity, and the NYMEX Division light, sweet crude oil futures contract is the world's most liquid forum for crude oil trading, as well as the world's largest-volume futures contract trading on a physical commodity.

Because of its excellent liquidity and price transparency, the crude oil contract is used as a principal international pricing benchmark. Additional risk management and trading opportunities are offered through options on the futures contract; calendar spread options; crack spread options on the pricing differential of heating oil futures and crude oil futures and gasoline futures and crude oil futures; and average price options.

The crude oil contract trades in units of 1,000 barrels, and the delivery point is Cushing, Oklahoma, which is also accessible to the international spot markets via pipelines. The contract provides for delivery of several grades of domestic and internationally traded foreign crude oils, and serves the diverse needs of the physical market.

Light, sweet crude oils are preferred by refiners because of their low sulfur content and relatively high yields of high-value products such as gasoline, diesel fuel, heating oil, and jet fuel.

The Brent blend futures contract is based on a light, sweet North Sea crude oil that serves as a benchmark grade and widely trades as a differential to the NYMEX Division's bellwether light, sweet crude oil futures contract. Most of the crude oil is refined in Northwest Europe, but significant volumes move to the U.S. Gulf and East Coasts.

Complementing the Brent crude oil futures contract are an options contract, calendar spread options contracts, and an options contract on the Brent/West Texas Intermediate crude oil spread.

More Information on Crude Oil Trading

Edge Financial Group is registered and licensed as an Introducing Broker with the Commodity Futures Trading Commission, the federal regulatory agency of futures and options. We are also a member of the National Futures Association, a self-regulatory agency working with the Commodities Futures Trading Commission. Our firm is fully licensed.

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