HFM information and reviews
HFM
96%
FXCC information and reviews
FXCC
92%
FxPro information and reviews
FxPro
89%
FBS information and reviews
FBS
88%
XM information and reviews
XM
86%
NordFX information and reviews
NordFX
86%

Crude Oil Volatility Trading Strategies


Crude oil has high liquidity and great openings to profit in most market conditions as a result of its unique relationship with the world’s political and socio-economic systems. In addition, the volatility of the energy sector has advanced rapidly in recent years, leading to strong trends of steady returns for long term “market timing” strategies and short term “swing trades”.

Traders regularly fail to take advantage of the fluctuations in crude oil prices due to the fact that they might be unaware of the exclusive features of this market or because they are oblivious of the market’s hidden dangers and subsequently lose profit.

Whether you are an experienced or first-time trader, this article will help you make potentially some profits from trading crude oil by implementing the following trading strategies.

Due to the recent volatility in oil prices, if a trader is able to predict the right direction of the price, then there is a great chance for them to make profit.

Traders can take advantage of volatile crude oil prices with the use of derivative strategies. These strategies comprise of concurrently taking positions in futures contracts and buying and selling options on any exchanges offering derivative products of crude oil. “Long straddle” is the so-called strategy of buying volatility or benefiting from a rise in volatility. This strategy comprises of buying a put and a call option at exactly the same price and it becomes profitable when there is a substantial move in a downward or upward direction.

If oil, for example, is currently trading at US$85 and the call and put option strike prices are $8 combined, then the strategy is profitable if there is a $8 movement in the oil price. So, if the oil price increases past $93 or drops past $77 then the strategy will result in profits.

“Short straddle” is the so-called strategy of selling volatility or benefiting from a decrease in volatility (or steady volatility). It comprises of selling a put and a call option at exactly the same price. “Short straddle” becomes profitable when the price is moving within a tight range for a period of time.

If oil, for example, is currently trading at US$85 and the call and put option strike prices are $8 combined, then the strategy will yield profits when there is no more than a $8 movement in oil price. So, if the price of oil rises up to $93 or drops up to $77 then this strategy will be profitable.

These strategies can function in both directions and therefore, if the person who is trading has in mind the oil prices, they can apply spreads that can give them the opportunity to profit and simultaneously limit any risks.

“Bear call spread” is a well-known bearish strategy which comprises of selling an OTM call, and buying an even further OTM call. The maximum profit for this strategy is the net credit amount and difference between the net credit amount and the strike prices is the maximum loss for this strategy.

A parallel bullish strategy comprises of buying an OTM call and selling an even further OTM call and is called the “bull call spread”. The maximum loss for this strategy is the net debit amount and the difference between the net debit amount and the strike prices is the maximum profit for this strategy.

Therefore, by using these derivative strategies, traders can potentially profit from the volatile prices of oil similarly to stock prices.

With knowledge about crude oil trading strategies you can open an STO account that gives you access to MT4, one of the industry’s leading forex trading platforms, and start trading today. Click on the link above for more information.

This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice. FX and CFD trading are high risk and may not be suitable for everyone, ensure you fully understand the risks. You may sustain a loss of some or all of your invested capital.

#source


RELATED

Bill Williams' Trading System

Bill Williams is a world famous trader, developer of analytical indicators and creator of Profitunity strategy. In 1987, his first works on trading in the stock...

Top 10 forex trading strategies for beginners

If you’re a forex beginner, learning how to better manage trading in the forex market is key to achieving success. This is because the forex market is an incredibly volatile financial market...

How To Strategically and Effectively Diversify A Currency Trading Portfolio

In the multifaceted arena of currency trading, a trader’s success pivots not solely on precise market analysis and judicious decision-making but significantly on the astute construction of the trading portfolio...

Maximizing Day Trading Success: Optimal Times, Strategies, And Market Insights

When it comes to day trading, simplicity can be beneficial. Spending two to three hours daily is often more advantageous for most traders in stocks...

Crafting a Winning Day Trading Strategy: A Comprehensive Guide

Day trading is a popular approach to online earning, involving the buying and selling of various financial assets, such as stocks, commodities, and cryptocurrencies...

The Rollercoaster of Day Trading: Navigating Financial Downfalls and Crafting Success

Day trading is a world rife with both exhilarating highs and sobering lows, embodying the essence of the classic risk-reward paradigm. Within its tumultuous landscape, tales of day traders and hedge fund maestros...

Copy Trading: A Comprehensive Guide to Social Financial Strategy

Modern trading platforms and strategies continually evolve, offering investors innovative ways to navigate financial markets. One such strategy that's been catching waves lately is copy trading...

Mastering Cryptocurrency Trading: Strategies for Bitcoin, Ethereum, and More

Cryptocurrency trading has become a captivating realm for investors and traders alike, offering the potential for substantial profits, particularly when combined with tools like 100x leverage...

Free Forex trading system that works

Financial markets shouldn't be traded without a sound tried and tested trading system, and the Forex market is no exception. Making the right...

How to Create a 24 Hour Forex Market Trading Strategy

One of the essential components of becoming a successful trader in the 24 hour Forex market is having a trading strategy. A trading strategy provides direction on which markets to trade...

Avoiding Bull Traps in Trading: Understanding and Strategies

In the dynamic realm of financial trading, a solid comprehension of various market phenomena is the linchpin for triumph. A pivotal concept that demands traders' attention...

How to Make Profit with Stop Losses

The international currency market quickly gained its popularity due to the possibility of active use of borrowed funds (leverage) by traders. In financial markets...

Top IronFX Forex Trading Strategies in 2022

A forex trading strategy refers to a unique technique used by forex traders to guide them regarding whether or not to buy or sell a currency pair at any given point...

Crafting a Robust Trading System: Strategies, Analysis, and Management

In today's complex financial landscape, trading across various markets demands a strategic approach. Creating an effective trading system involves a combination of technical expertise...

Scalping vs Day Trading: What is the Difference?

Most beginning traders understand the importance of having a good trading strategy. However, it is only after you have a trading strategy that is congruent with your personality...

Short-Term vs. Long-Term. What is Your Strategy?

People always want to find the best type of trade to invest in. This particularly holds for short-term and long-term trading. This decision, however, varies from person to person...

Investment Strategies: How To Choose The Right One For You

One person wants to save for retirement 25 years. Another wants to invest in various instruments for no longer than a year. These investors have different goals and investment timing, which means different market behavior...

Best Forex Manual Trading Strategies: Grid Trading And More

Manual forex strategies differ from automated and semi-automated trading methods in that all market analysis and other actions are performed by the trader, without the use of additional indicators...

How to develop your signature Forex trading strategy

Trading in the Forex market is a complex daily work that requires great strength, knowledge and experience. Before a trader...

FXCC: Intraday trading. Benefits and Drawbacks

Defining the term intraday trading is the concept of selling and buying stocks on the same day, just before the market’s closure. If you somehow fail to do so, the broker will ultimately square off...

Vantage information and reviews
Vantage
85%
FP Markets information and reviews
FP Markets
81%
IronFX information and reviews
IronFX
77%
T4Trade information and reviews
T4Trade
76%
Exness information and reviews
Exness
76%
Just2Trade information and reviews
Just2Trade
76%

© 2006-2025 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.