How Retail Traders Can Take Advantage Of The Energy Boom With Micro Crude Oil Futures

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The following post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. This article is the opinion of Optimus Futures.

Energy performed better than any other sector in 2021, gaining 53.1%.

Crude oil’s rise from $47 a barrel (West Texas Intermediate) more than $75 a barrel helped make this happen.

Depressed since 2014 by increased supply, disruptions in supply driven by COVID helped oil hit its highest levels in years.

The most direct route to trading crude oil prices is through crude oil futures.

Today, retail and institutional traders have a unique option with micro crude oil futures.

This article explains what micro crude oil futures are, what influences the price movement, where you can find advantages and how to get started trading them.

What Are Micro Crude Oil Futures?

Micro crude oil futures are the smaller relatives of mini and standard crude oil futures.

Like crude oil futures, micro contracts are leveraged derivatives based on a settlement date in the future for a set amount of crude oil.

Normally, mini crude oil futures control 500 barrels of oil per contract while regular futures control 1,000 barrels.

Micro contracts control 100 barrels or 1/10th the size of a standard contract.

Each $0.01 change on a micro crude oil contract translates into a $1 in the value of that futures contract compared to $10 for a regular crude oil contract.

As with other crude oil futures contracts micro contracts contain the following characteristics:

• Tied to West Texas Intermediate Crude (as opposed to London Brent)
• Trades Sunday to Friday from 6 p.m. to 5 p.m. EST
• Listed on the New York Mercantile Exchange (NYMEX) exchange

One key feature separates micro and mini crude contracts from standard crude contracts.

Both mini and micro crude contracts are cash settled, so if you hold them at expiration, your gains or losses are settled in cash.

Regular crude oil contracts require physical delivery of the product. So, if you held a regular crude oil contract at expiration, you would be obligated to take delivery of the product.

What Causes Micro Crude Oil Futures To Move?

Crude oil is a commodity in almost the purest sense. An end user doesn’t care where or who the oil came from (trade embargos aside) since all crude oil looks the same.

This feature leads crude oil prices to change primarily based on supply and demand relative to crude oil stocks.

Traders look to a few regular reports including:

• U.S. Energy Information Administration (EIA) inventory report every Wednesday at 10:30 a.m. EST
• American Petroleum Institute Inventory and production numbers every Tuesday at 4:30 p.m. EST
• Baker Hughes Rig Count every Friday at 1 p.m. EST

These reports can often spark volatility in intraday price action.

Additionally, many crude market followers look to meetings of the Organization of the Petroleum Exporting Countries (OPEC) for clues to future output changes.

It’s worth noting that natural disasters can create supply disruptions such as hurricanes. We’ve also seen geopolitical issues drive up prices, including embargos and armed conflicts.

Why You Might Consider Micro Crude Oil Futures

Buying and selling oil and gas stocks only tangentially exposes you to the commodity. Plus, you are exposed to business-specific risks.

In fact, midstream and downstream oil and gas companies aren’t impacted by oil prices nearly as much as upstream exploration companies.

Trying to keep all that straight can be challenging and could water down your investment ideas.

Crude oil futures are the only direct way to trade crude oil prices other than options.

In fact, most exchange-traded funds (ETFs) and exchange-traded notes (ETNs)  that track crude oil, such as the U.S. Oil Fund USO, use crude oil futures as the main instrument for their product.

Micro crude oil futures allow traders more flexibility with smaller contracts while maintaining the capital efficiency you get with standard contracts.

Plus, you get many of the advantages of futures contracts including centralized clearing, no pattern day trading restrictions, as well as the ability to make long and short bets on crude oil prices.

Traders can use micro crude oil futures as they would standard contracts to hedge their current positions or take outright speculations. However, the smaller size lets them better fine-tune their strategies.

And unlike standard crude oil contracts that require +$9,000 margins for initiation and maintenance along with $2,250 for day trading, micro crude oil contracts require as little as $530 and $100 respectively.

How To Get Started Trading Micro Crude Oil Futures

Ready to start trading micro crude oil futures? Optimus Futures is ready to help.

With low margins and just $100 to get started, traders can tour their flagship Optimus Flow platform that unlocks all features out of the gate including real-time news feeds and an automated journal.

Learn more about Optimus and micro crude oil futures here.

Or Check out Benzinga’s Full Optimus Futures Review

This matter should be viewed as a solicitation to trade. Trading futures and options involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results. CME Micro contracts generally have a value and margin requirement that is one-tenth (10%) of the corresponding regular contract. The cost of trading Micro contracts is higher than regular contracts, when measured as a percentage. Commission rates are not always one-tenth of the rate for regular contracts. Exchange and NFA fees are not proportionately reduced. Frequent trading of Micro contracts further compounds the cost disparity. Futures transactions are leveraged, and a relatively small market movement will have a proportionately larger impact on deposited funds. This may result in frequent and substantial margin calls or account deficits that the owner is required to cover by depositing additional funds. If you fail to meet any margin requirement, your position may be liquidated, and you will be responsible for any resulting loss.

This post contains sponsored advertising content. This content is for informational purposes only and is not intended to be investing advice.

The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. This content is for informational purposes only and not intended to be investing advice.