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What Mini Crude-Oil Contracts Are and Why They Could Be Good Bets

Video Credit: The Street - Duration: 02:27s - Published
What Mini Crude-Oil Contracts Are and Why They Could Be Good Bets

What Mini Crude-Oil Contracts Are and Why They Could Be Good Bets

TheStreet's CME Webinar -- How to Trade the Fed, Trade Wars, Brexit, Oil and Gold Using Futures -- has everything investors need to hedge risk factors across numerous segments using tools from CME Group's arsenal.

With geopolitical pressures at the forefront of markets in 2019, and likely in 2020 as well, a few top trading experts have advice on how to navigate on a day-to-day basis.

One little-talked-about asset, mini crude-oil futures contracts, could be profitable on some days.

One of those experts, Bob Iaccino, chief market strategist of Path Trading Partners, breaks down how the contracts work: "It's half the size of the regular crude-oil contract.

So it's half the risk.

The specs of the contract: 500 barrels instead of 1,000 and it is one of those things where the product itself gives pure exposure to the market or rather the commodity that you're looking at.

[It's] something that kind of drives me crazy.

Obviously, I have financial news on in the background all the time where I hear people say, `we think oil is going down, so what oil names should we look at?'

As opposed to ... `if you think oil is going down, trade oil, right?

Why are you trading something other than the thing you're looking at?'

So the crude-oil contract gives you, obviously, exposure to crude oil, even USO, which is a very popular ETF that people will trade when they have an opinion on crude oil." Here's an on-the-ground example of the advantage of buying the mini crude contract, rather than the main crude ETF: "There was a day last October 11th, [and West Texas Intermediate] crude oil moved $1.40.

USO moved 18 cents.

And again USO is the oil ETF.

If you were fortunate enough to buy the open and sell the close, you would have made about $515 in the mini crude contract.

In the ETF, you would have made 18 cents per a USO contract that you bought," Iaccino said.


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