Product Focus: Energy Product Suite

By Craig Bewick
MAR 24 2021

Today, we continue with our spotlight on a product instead of a market recap due to vacation schedules.  CME Group offers many products within its Energy products suite and we’ll showcase a couple here that are popular with active individual traders, specifically WTI Crude Oil and Henry Hub Natural Gas futures and options. 

WTI Crude Oil

WTI Crude Oil futures (West Texas Intermediate) is a light, sweet crude oil that is stored and distributed in Cushing, Oklahoma and has long been a global benchmark for the price of crude oil. CME Group offers two different futures products on WTI Crude Oil:

  • “Standard” Crude Oil (CL) which represents 1,000 barrels of crude, ticks in .01 per barrel increments with a resulting tick size of $10.00 per one cent per barrel move in the price of WTI Crude Oil.  Currently, the margin required for the next expiring contract month is $4,525.  Keep in mind, it is a physically delivered product so traders need to be aware of the expiration day each month. 
  • E-mini Crude Oil (QM) which shares many of the characteristics of CL but at half the contract size of 500 barrels and half the margin requirement.  The minimum tick in the QM is $.025 per barrel which results in a minimum tick size of $12.50.  The E-mini is a cash settled product but traders should still be aware of the expiration date of the contract as liquidity conditions can change as the majority of the volume transitions to the next expiration month.
  • Options on WTI Crude Oil:  CME Group offers options on WTI Crude Oil that expire both monthly and weekly.  The weekly options have gained in popularity as they allow participants to take a very precise, short dated view on different economic events, OPEC meetings and other potentially market moving news.

Henry Hub Natural Gas

CME Group maintains a very liquid Natural Gas futures and options market and is the third largest physical commodity futures contract in the world by volume.  Some traders find Natural Gas an interesting product to trade due to the seasonality associated with the price action and because it tends to be among the more volatile products at CME Group.  As with CL, Natural Gas futures are physically deliverable so it is important (as with all futures contracts, actually) to know what the expiration date is.  Also similar to CL, Natural Gas options are offered with both monthly and weekly expiries. 

If you’d like to learn more, we’d encourage all of our users to check out the following resources for both standard and E-mini WTI Crude Oil:

WTI Crude oil

E-mini WTI Crude oil

Finally, we used QuikStrike to graph the 30-day implied volatility of products from several different CME Group asset classes.  We intentionally used the same scale for all products to illustrate the fact that these Energy products (dotted lines in the graph) tend to trade a higher relative levels of implied volatility. 

ABOUT THE AUTHOR

Craig Bewick has spent 25 years in futures and options markets, starting at CBOT and CME working in risk management, regulatory, technology, product management and client development. 

Connect with Craig at activetrader@cmegroup.com

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