E-mini WTI Crude Oil (QM)

E-mini WTI Crude Oil is a financially settled contract, which means delivery will take place in the form of cash settlement. A trader holding an open QM position in an expiring contract at its termination of trading shall make payment to or receive payment based on the contract’s Final Settlement Price. When a contract is cash-settled, settlement takes place in the form of a credit or debit made for the value of the contract at the time of contract expiration.

It is important to be aware of when trading terminates for QM to take the appropriate action on your position. As the last trading day approaches, the liquidity tends to transition from the front month to the next corresponding contract month. It is imperative that traders monitor market liquidity leading into the last trading day so as to avoid difficulty managing your position.

So, a trader holding an open position in QM as last trading day approaches essentially has three options. They can:

1. Close their position by either buying or selling the number of contracts they are holding, leaving them without exposure to WTI Crude Oil.
2. Roll their position to a deferred month. Typically, traders who want to maintain exposure to WTI Crude Oil will roll their position to the next expiring month. This is a common practice throughout all futures products and there is typically a very efficient, liquid spread market on CME Globex that enables market participants to roll positions in a cost-effective manner. For example, if a trader was long one March QM contract and wanted to maintain that long exposure, they could sell a Mar/Apr spread (sell Mar buy Apr) and the resultant position would be long one April contract.
3. Hold the position and allow it to go into delivery. A trader will make or receive payment based on the contract’s Final Settlement Price. This option would close their position, leaving them without exposure to WTI Crude Oil once the delivery process concludes.

Delivery under the E-mini Crude Oil Futures contract shall be by cash settlement. Final settlement, following termination of trading for a contract month, will be based on the Floating Price. The final settlement price will be the Floating Price calculated for each contract month.

NYMEX Rulebook Chapter 401 describes the specific rules surrounding the delivery process for E-mini WTI Crude Oil.

In order to hold a futures positions, traders are required to post what we refer to as “margin” for each contract held. Unlike US equities, where trading “on margin” involves a loan from one’s broker (and associated interest payments), “margin" in futures is a performance bond or collateral held by the broker.

Currently, the margin requirement for one contract of QM is $2,262. If a trader holds one contract, they would be required to post that amount as collateral. If the position were to move against the trader, they would be required to post additional funds in order to maintain that amount. This is what is referred to as “mark to market”.

It is important to keep in mind that margin requirements can change as volatility in the market adjusts. CME Group will typically require higher margins as volatility increases. Additionally, brokerage firms may, at times, require higher margins than the Exchange.

The price of WTI Crude Oil can be impacted by many different factors, and it is the global benchmark for one of the world’s most important commodities.

One of the reasons that WTI Crude Oil is a popular product to trade is the many different elements that can contribute to the price of oil including supply/demand, storage, currency fluctuation, geopolitical disruptions (particularly in the oil-producing Middle East), natural disasters, and more.

Because of the numerous factors that can impact the price of WTI Crude Oil, we recommend traders familiarize themselves with CME Group’s Event Analyzer which lists the different economic events and number releases that can affect the price level. Learn more.

Dynamic circuit breakers (DCBs) are similar to traditional circuit breakers but move with the market throughout the day. Within a specific time interval, DCBs define an upper and lower limit of how far an instrument is allowed to move in a specific time interval, usually an hour.

Each product has its own assigned value used to calculate the circuit breaker level, typically a percentage of its previous settlement price. QM’s dynamic circuit breaker is 15% and you can find more information on our DCB methodology here and here. You can download our DCB per product here.

Velocity logic governs how far the price of a product can move within a very short period of time. Whereas price limits and DCBs look at price moves on a daily or hourly basis, velocity logic is a control designed to prevent market dislocation on a second by second, or even sub-second, time interval. Velocity logic events can cause a particular market to halt temporarily when a market reopens after a velocity logic event has been triggered, CME Group will restart the 60-minute window and calculate accordingly. Velocity logic uses a lookback window’s highest and lowest prices in the previous time interval. If QM’s lookback window consists of a high price = 42.17 and a low price = 42.13 and the velocity logic’s variance is 1.5, then the VL high bid = 43.67 and VL low bid = 40.63. You can learn more about velocity logic here.

Price banding evaluates incoming orders to ensure that a single order is not filled outside of an acceptable range from the last price, either on the upside or downside. It is symmetrically applied to both the upside (for bids) and downside (for offers) to determine the price band variation range (PBVR). With each price change, the PBVR is recalculated and the new range is applied. The CME Globex platform rejects all bids and offers outside the PBVR. QM’s price band is .5 (found in the GCC Product Reference Sheet). If QM is trading at $42.15, then the effective price bands are: bid = $42.65 and ask = $41.65.