Word: traded
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...need a huge pot of bailout money to trade oil these days. Just don't expect to make the big bucks without...
First, you'll need money. How much? Let's say you want to trade one contract of crude oil on the New York Mercantile Exchange (NYMEX). Since you're not a member of the exchange, and no one will really trust your new oil venture, you're going to need to start with at least $10,000 in your margin account (similar to a brokerage account, but it lets you leverage your bets to the hilt) as collateral to comfortably trade one contract. That might sound like a lot for just one contract, but a single contract on NYMEX represents...
Next, you need to find a broker and clearinghouse to connect you with the markets to trade and also act as insurance to the exchange that you will cover any potential losses. (Read "Borders of Sudan's Oil-Rich Region Shrink...
...time to trade. So where do you start? With a clear idea of what you're trading: you're not trading oil. You're trading a contract obligating you to buy or sell it at a specified delivery date in the future. But don't worry: as long as the number of contracts you buy equals the number of contracts you sell, you won't have to worry about the physical barrels...
...barrel, and buy it back at, say, $65 per barrel, you keep the $1 per barrel difference. On one contract, or 1,000 barrels, that comes to $1,000. Not bad for a hard day's work. But take the other side of that trade - buy for $66 and sell for $65 - and you've lost a grand per contract. Remember that on both trades, you're going to pay high transaction fees and commissions, and you'll likely be forced to take a worse price in order to guarantee that your trade executes. In all, you'll probably give...