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I had a rather simple question about CL and QM Crude oil contracts. Basically my question is for CL I am aware its 1000 barrels opposed to QM 500 barrels being traded on the contract, but my question is when you purchase a CL contract to trade on your platform, how much money does that contract cost?
I am asking the intitial price of the CL contract, not the margin required in the account to keep the trade open. So when I buy it, is it $500 for that CL contract being used from my account to purchase it? or does the contract initially cost $1000 from my account?
Can you help answer these questions from other members on NexusFi?
Mike That post showed me a lot. In your post it says Margin requirement for a CL is $2000 but can be negotiated down. Now when I actually buy the contract, the cost taken from my account is $1000 correct? so my used margin is $1000 for that 1 CL contract? Just wondering because when I trade crude with a forex broker, its usually .50 to purchase 1 lot.
If the margin is $2,000 then when you buy 1 contract, you must have $ 2,000 in your account. If the order goes heavily against you, the broker will liquidate your position before your account hits zero balance.
If you had $ 1,999 in your account and the margin requirement is $ 2,000, you cannot buy 1 contract of CL.
If you have $2,500 in your account, you can only buy 1 contract of CL, not two.
So there is no set price for a contract? just margin requirments from different brokerages? I have only been doing forex up to this point and I am used to paying a given amount for 1000 lots of crude oil. which is $500 at 50 cents per lot.
Step 1: You need whatever your margin requirement is to be able to buy a contract.
Step 2: When you buy a contract, you will be filled at the price the market is currently trading. For instance $ 76.15 or whatever is the current price.
If you want to buy 1,000 lots of CL @ 76.15 and your broker has a $2,000 margin requirement, you will need to have $ 2,000,000 in your account. The same would be true if CL was trading at $125.00 or if it was trading at $50.00. Still 2 million needed in the account. The margin requirement is set by the broker (and the exchange) based on the daily volatility of the instrument.
Suppose I have a future account with apex and $2000 margin. the price of crude oil is at 76.00 a barrel and I go long on a contract. How much money is taken from my account as soon as I open that position for that 1 CL contract? There must be a cost taken out of my account to open that position?
Nothing is taken from your account until you close the position.
Instead, think of it like a credit card. A temporary authorization is placed on your account equaling the margin requirement. If you have a $3,000 credit card limit, and a temp authorization is placed for $ 2,000, it will succeed. But if you try to buy another $ 2,000, it will be declined. If you close the position break even, the $2,000 temp authorization is just cancelled. If you close the position down 100 ticks ($1,000) then you'll get debited $1,000.
Regardless of the above, the $76.00 per barrel is never a factor. Only the margin, and the net position result (+/- xxx ticks) is a factor.
Thanks that cleared a lot of things up for me. Its different with my forex account because when I buy the units of oil, it takes the money out of my account at .50 a unit plus any losses I am enduring at the current time.
Mike sorry 1 more question. I am Daytrading and Say I put the minimum margin requirement set by a broker of $2000 for a CL contract. I go long on a CL contract trade and it ends up going down .30 cents. My loss is $300 so my margin is down to $1700 now. Would the broker liquidate the trade as soon as it went below $2000, so say even $1999? or would it keep going down until I closed it?
