How to Trade Oil In A Securties Trading Account

How to trade oil in our main question. How to trade oil is typically addressed in context of commodities futures account. We want to cover how to trade oil in securities trading accounts (typically a brokerage account).

Difficulty: Moderate

Instructions

Things You'll Need:

• A securities trading or invetsment account.
• Knowledge of how to trade
• Risk capital

1. Open a securities trading account, which typically a brokerage account for non retirement accounts, or an IRA account. It is only lately that one can Trade Oil In A Securities Trading Account.

2. Build a list of EFT funds that follow oil prices. An example of these EFTs is the USO. There is a number of them. Ask your broker about disclosure forms for these EFT, and check the news to make sure that the financial companies managing them are doing well. These EFTs are typically management by major banks, but in times of financial turmoil I would double check.

3. Determine whether the EFT you selected is a leveraged fund or a non leverage fund. If you do not know what a leverage EFT is, ask your broker. I would stick with non leveraged EFTs that follow oil, because leverage has its negative side, and also some leverage funds may use long options which have premium that erodes over time.

Tips & Warnings

• You may want to learn how to sell call premium on your oil EFT, as it can provide return in case oil price does not move or in case it does decrease in price. However, one gives up the upside potential if one writes calls for all stock EFT holding.