Beyond the basics of supply and demand, global tensions and currency fluctuations also change the value of a barrel of oil.
The dynamic moves of an often emotional energy market can add up to big profits for those on the right side. The drop from $100 little over a year ago led to levels not seen since 2009.
Volatility is opportunity with many choices to make when trading crude.
Producer stocks like Exxon or Chevron often move with the price of oil, but they have other individual share inputs.
A couple of the more direct oil vehicles include Exchange Trade Funds (ETFs) and crude oil futures contracts.
ETFs have become very popular investments with comparisons to mutual funds without the high fees. Entry and exit in ETFs can occur anytime the market is open trading much like a stock.
The XLE Energy ETF is not a pure oil play, but a broad barometer that is a diversified energy play with a certain percentage affected directly by the price of crude.
Crude futures contracts require a deposit of about 5% of the total value of 1000 barrels. Each dollar move translates into $1000 gain or loss.
The USO exchange trade fund trades like a stock and holds a portfolio of crude contracts selling the most current month when they come due to buy distant ones. That function can be problematic when consistently exiting low priced contracts to buy more expensive ones.
Options on crude futures and the USO ETF can also be used with eyes on how the underlying instrument performs. Strategies to capitalize on prices moving up, down or nowhere gives many options using options.
Choice is good, with solid investment vehicles in black gold.
