| Strategy type |
Description |
| Hedging risks against oil price growth |
If a hedger plans to make a purchase of oil, but has a fear of rising oil prices, he has an opportunity to buy a futures contract on this asset today that expires in future (long hedge). The purchase of a futures fixes the price of physical oil and may be regarded as an insurance against possible price growth in future. |
| Hedging risks against oil price fall |
If a hedger plans to sell oil in future, but has a fear of falling oil prices, he has an opportunity to sell a futures contract on this asset today (short hedge). Selling a futures he fixes the price of physical oil and may be regarded as an insurance against possible price decline in future. |
| Trading with leverage |
The leverage on oil futures is 1:8. (The Initial margin is 12% of its price, which means that in order to buy a futures it is enough for an investor to pay just 12% of its full price). |
| Short sale |
Oil futures give an opportunity for selling short even if an investor does not have a physical asset. |
| Calendar spread |
Several futures contracts with different expiration dates traded simultaneously on the derivetives market allow the market participants to trade on narrowing or increasing price spreads between them. |
| Product spread between Brent and WTI |
Trading with spreads between Brent and WTI. The Brent / WTI spread is the difference in prices of the contracts with different oil grades which have an expiration in the same month. A negative spread is an indicator of strong fluctuations on the oil market. |
