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July 3, 2007
Gasoline Futures

The Energy to Make Profits
Probably the biggest on-going news story in the United States is gas prices. Every day the news trumpets the prices to eager viewers; the price is up and everyone panics, the price is down and it is cause for celebration. Wall Street news is affected by the price of gas, and stocks seem to rise and fall with each change at the gas pump. This interest translates to the futures markets as well as gasoline futures, which have become the next hot commodity as investors and speculators seek to capitalize on the intense interest that surrounds this valuable commodity.

Contract Details
Like other commodities in other market sectors, gasoline futures are traded throughout the world. One of the primary locations for this trading is NYMEX in New York City. With both floor trading and electronic trading, buying and selling gasoline futures is nearly a "round the clock" opportunity. In order to understand the framework of a gasoline futures contract, it is important to understand its details. Some of the details included in a contract include:
  • Unit Size – 42,000 US gallons or 1,000 barrels.


  • Contract Length – Options contracts on gasoline futures are based on twelve month cycles.


  • Units of Price – Prices for these futures options are stated in dollars per gallon.


  • Tick Size – The tick size, or minimum price fluctuation, for a gasoline future is $0.0001 per gallon or $4.20 per contract.


  • Maximum Daily Price Change – Six cents per gallon.


  • Delivery – New York Harbor, with alternate deliveries in pre-approved cases. Like is the case with oil futures, gasoline futures are rarely delivered to the buyer, rather they are redirected or resold to someone who will accept delivery.

The Logic of Investing In Gasoline Futures
Thinking back on the definition of futures, these contracts give their buyers the right to execute the contract if they desire. If the conditions are not met, a successful trader can simply walk away from the deal. To trade futures, it is necessary to find and interpret changes in price so that you can profit from your deals. If you get good at it, trading gasoline futures can definitely help you to increase the size of your trading account. If you don’t take the time to learn the rules and how to watch the market, it can empty your account as well.

Getting Under The Hood
Think about it this way: If you know nothing about automotive repair and have a problem with your car, will you try to fix it? Probably not. But automotive repairs can be very profitable for someone who understands cars. It’s the same way with futures trading. If you don’t understand the basics and you aren’t familiar with gasoline futures, you will probably have trouble.

Being successful in gasoline futures, corn futures or any other commodity is the result of preparation. By having an understanding of the investment strategies involved, you will be able to monitor trends and the news, and then make wise decisions based on what you actually know and not on what you THINK you know. In addition, the inclusion of a trading system like Japanese Candlesticks will provide you with the opportunity to best track trends in the gasoline futures market and accurately analyze the trends.

Conclusion
Trading gasoline futures can be a very profitable opportunity for investors who are serious about making money. Like its cousin from the energy sector, oil futures, gasoline futures can be a volatile commodity and this movement opens opportunities for traders who have the “energy” for commodities trading of this valuable and interesting asset.


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posted by Stephen W. Bigalow at 2:45 PM

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