If you`re looking to trade crude oil, the CME (Chicago Mercantile Exchange) WTI (West Texas Intermediate) futures contract is one of the most popular options available. Understanding the contract specifications can help you make informed trades and manage your risk appropriately.
First, let`s define some terms. WTI crude oil is a type of oil that is drilled in the United States and is used as a benchmark for global oil prices. A futures contract is an agreement to buy or sell a certain asset, in this case, crude oil, at a set price on a specific date in the future.
Now let`s take a closer look at the CME WTI futures contract specifications:
Ticker Symbol: CL
Contract Size: 1,000 barrels
Price Quotation: In U.S. dollars and cents per barrel
Minimum Price Fluctuation: $0.01 per barrel
Trading Hours: Sunday – Friday, 6:00 p.m. – 5:00 p.m. Eastern Time (ET) with a 60-minute break each day at 5:00 p.m. ET
Expiration: Trading ceases at the close of business on the fourth business day prior to the 25th calendar day of the month preceding the delivery month. If the 25th calendar day of the month is a non-business day, trading ceases on the fourth business day prior to the business day preceding the 25th calendar day.
Delivery: Physical delivery of the underlying crude oil is possible, but most traders do not take physical delivery. Instead, they offset their positions by buying or selling a contract before expiration.
Margin Requirements: Traders must maintain a certain amount of funds in their account to cover potential losses. The initial margin requirement for the CME WTI contract is set by the exchange and varies based on market conditions. Currently, the initial margin requirement is $4,500 per contract.
As with any investment, it`s important to do your own research and understand the risks involved before trading crude oil futures. It`s also advisable to work with a reputable broker who can help guide you through the trading process.
In conclusion, understanding the CME WTI contract specifications is crucial for anyone looking to trade crude oil futures. By familiarizing yourself with the terms and requirements, you can make informed trades and manage your risk effectively.