Spot Price Oil CFDs are Broken - Easy Profit
In the UK, retail traders are able to buy a "Contract for difference" with a broker. These are bets on the price of an asset and do not actually contain any underlying securities.
70-80% of retail traders lose money from trading CFDs, which has made providers overconfident in allowing people to trade things that can not actually be bought on any market, for example, the spot price of a commodity can be bet on. The issue with this is that traders can not actually buy oil at spot price and hold for a period longer than the period of the futures contract without physically buying, transporting and storing oil . OIL ETFs that attempt to match the spot price exist, however, they suffer from slippage, especially when different months contracts diverge in price.
There is usually a small difference between the different months WTI Oil futures , however these have not ever been large enough for CFD traders to profit from because of the spread and overnight holding fees.
The current oil storage crisis has created a huge divergence between the spot price and the price after coronavirus is expected to have calmed. October futures are priced at $27; June futures (the current spot price) are $14. This means that the market has already priced oil in October to be at $27, so it is most likely to nearly double in price by then. This has exposed a mistake in the way CFD brokers allow bets on commodity spot price.
Buy a spot price CFD and sell at around $27 in about half a year's time.
70-80% of retail traders lose money from trading CFDs, which has made providers overconfident in allowing people to trade things that can not actually be bought on any market, for example, the spot price of a commodity can be bet on. The issue with this is that traders can not actually buy oil at spot price and hold for a period longer than the period of the futures contract without physically buying, transporting and storing oil . OIL ETFs that attempt to match the spot price exist, however, they suffer from slippage, especially when different months contracts diverge in price.
There is usually a small difference between the different months WTI Oil futures , however these have not ever been large enough for CFD traders to profit from because of the spread and overnight holding fees.
The current oil storage crisis has created a huge divergence between the spot price and the price after coronavirus is expected to have calmed. October futures are priced at $27; June futures (the current spot price) are $14. This means that the market has already priced oil in October to be at $27, so it is most likely to nearly double in price by then. This has exposed a mistake in the way CFD brokers allow bets on commodity spot price.
Buy a spot price CFD and sell at around $27 in about half a year's time.
Trade closed: target reached:
Quicker than expected but I'll take it
