Crude oil for the portfolio: participate in the price of oil – how do you actually invest in oil? | news

Crude oil for the portfolio: participate in the price of oil – how do you actually invest in oil?  |  news

• Oil stocks show a relatively high correlation to the oil price

• CFD contracts allow quick speculative profits – but also losses

• KO certificates are suitable for short-term speculation on the oil price

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Trade oil, gold, all commodities with leverage (up to 30) (starting at €100)

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Individual investors considering investing in crude oil have a variety of options. In addition to commodity certificates, Exchange Traded Commodities (ETCs), sector ETFs and CFDs, investors can also invest in classic companies that focus on the exploration and sale of oil, i.e. the upstream and downstream business – the oil prices always in view.

Invest in oil stocks

Investors who want to easily participate in the development of oil prices can do so with the world’s largest mineral oil companies such as ExxonMobil, Royal Dutch Shell, BP, Chevron or TotalEnergies. The advantage of a direct investment in oil stocks is obvious. Because investors benefit from the long-term perspectives of the companies and the dividend payments, which are usually lavish in relation to the overall market. In addition, trading in shares offers a high level of flexibility in terms of buying and selling on the stock exchange. Furthermore, oil stocks have a much lower risk than derivative financial instruments, which are only derived from their market-related reference value.

Oil stocks do not offer a 1:1 opportunity for participation

Despite all the positive aspects of a direct investment in oil stocks, investors need to know that the share certificates of the large mineral oil companies cannot benefit 1:1 from a rising oil price. While the direct correlation between the price of crude oil and the share prices of the major oil multinationals is high at between 0.5 and 0.6, a perfect correlation would require a value close to 1. A correlation of 0.5 means that around 50 percent of the change in the share price of the respective company can be derived from the development of the oil price.

CFD contracts allow quick speculative gains

Risk-conscious investors who want to make their invested money completely dependent on the development of the crude oil price have to look around in the derivatives area. CFD contracts, knockout certificates and exchange-traded commodities (ETCs) are worthwhile for short-term speculation. Although futures contracts, which can be traded on commodity exchanges such as the New York Mercantile Exchange (NYMEX), also enable participation in the price of oil, they are not necessarily suitable for private small investors due to the high safety margins. With so-called contracts for difference or CFDs, however, such a safety margin, which is intended to ensure a possible additional payment, is not necessary. This type of contract is therefore also suitable for private investors.

Investment via ETC or certificate

Investors speculating on another price rally or seasonal correction can also do so with leveraged ETCs or Factor Certificates. Such leverage certificates can increase the performance of the underlying asset by a factor of two, three, four or more. In order for the issuer of such derivative financial products to be able to reflect the price development of the underlying asset, it must purchase futures contracts on the commodity exchange itself. However, since such contracts always have a certain term, there is a risk of rollover losses. This is because the issuing bank of the ETC or factor certificate has to keep investing in new contracts in order to enable the investor to participate precisely in the underlying asset. This transfer is known in the financial industry as “rolling”. Due to this fact, investors should rather avoid such products, especially if the underlying is in a sideways trend for a long time.

Speculate like the pros

Meanwhile, speculators looking for even more radical leverage can also look to Knockout Certificates. This group of derivatives enables the investor to leverage the underlying asset even in the two to three-digit range. These highly speculative products are also less suitable for a longer investment period and more for a holding period of a few hours to two weeks. Due to the enormous leverage effect, i.e. the enormous leverage, such derivatives are only suitable for stock market speculators with strong nerves. It is therefore always important that the respective derivative fits the risk class of the investor and his strategy or time perspective.

Editorial office finanzen.net

Selected leveraged products on BP plc (British Petrol)With knock-outs, speculative investors can participate disproportionately in price movements. Simply select the desired leverage and we will show you suitable open-end products on BP plc (British Petrol)

Leverage must be between 2 and 20

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Image sources: Anton Watman / Shutterstock.com, iStockphoto

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