Crude oil is at the cornerstone of the global economy and happens to also be the most traded commodity in the world in terms of value. Even though there exist a lot of other popular commodity assets among retail traders (gold, copper, wheat…), oil is also the most traded commodity among retail traders either through binary options, CFD or futures contracts. Why? Simply because it is the commodity people are the most easily able to relate to and also because it is one of the simplest commodity to understand.
Oil prices is a benchmark for economic health
Indeed, oil prices represent a gauge for the global economy. When the economy is doing well, oil demand is expected to increase by market participants and oil prices move up. When the economy is in recession, oil demand is expected to decrease by market participants and oil prices move down. Oil prices are also extremely sensitive to geopolitical tensions and can skyrocket in the event of tensions or conflicts that could threaten production levels. The value attached to a barrel of crude oil is a function of the demand and supply dynamics for the products. It is this change in value on an intraday basis that provides the basis on which traders go either short or long on the crude oil asset.
Like most commodity assets of ever commodity types (Energy, Metals, soft commodities…) crude oil is traded on a spot and futures basis. It can also be traded by retail traders through the use of binary options and CFD that are a lot more affordable and simple instruments. Indeed, crude oil futures contract size is 1,000 barrels and it requires a minimum margin of $4’000 to trade the smallest contract. In comparison, a retail trader can open a position on crude oil for a minimum of $25 on the binary options market. With binary option maturities as short as 15 minutes, an experienced binary options trader can use a minimum capital and make money using little risk.
How to speculate on oil?
There exist two major benchmarks for oil prices:
- The Brent crude oil that is traded on the Intercontinental Exchange (ICE)
- The WTI crude oil (Western Texas Intermediate) that is traded on the New York Mercantile Exchange (NYMEX)
The price feeds of theses assets are sent from these exchanges to the trading platforms of the various binary options brokers from where traders can chose between different binary options types on them. The NYMEX Open Outcry trading session lasts from 9am to 2pm EST, Monday to Friday and the electronic session of the Chicago Board Of Trade (CBOT) lasts from 7pm to 6.15 pm EST (next day), Sunday to Friday. It is at these times that the crude oil asset is available for trading in the binary options market.
Explaining oil prices variations
Like equity stock prices, oil prices are impacted by a large number of fundamental and technical factors. The fundamental factors include geopolitical tensions, the production quotas announcements by the Organization of Petroleum Exporting Countries (OPEC), GDP figures … The technical factors have to be decrypted using charts, these technical indicators will help you identify entry points and take-profit levels for your trading strategies. Depending on your binary option type, you may look for trends (High / Low options also known as Call / Put), support and resistances (No Touch options) or target levels (Touch options).
Trading oil with binary options
Trading oil using binary options is different from trading futures or CFD on oil. It involves the implementation of short-term trading strategies using the leverage of binary options in order to benefit from small moves in oil. You can make money with binary options whatever the level volatility of the market. This is the biggest advantage of binary options compared to other financial instruments. Almost all the recommended brokers of the website offer binary options on oil. Some brokers will even propose binary options on both WTI and Brent. Don’t hesitate to have a look at our detailed ranking of binary options brokers based on the number of underlying assets available to help you identify the broker that best fits your needs.
When trading oil using binary options, traders will basically be looking at factors that can trigger a sharp rise or drop in the price of a stock. Geopolitical meetings and conferences, OPEC productions reports and extreme weather conditions are very interesting periods for toil traders once you understood how to use the information provided by financial medias and production reports.
Don’t hesitate to have a look at our detailed review of OptionTime, AnyOption, 24Option and TopOption that all offer binary options on oil. 24Option is the broker that proposes the most extended combination of binary option types and maturities on oil. We highly recommend that you only deposit with brokers that you find listed on our website. This will secure safe withdrawals and should you face any difficulties we will be able to assist you.