Saturday, April 1

Investing in Oil: How to trade crude oil and speculate on the price of oil

Trade Oil: Invest 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 exactly in the underlying asset. This transfer is referred to as “rolling” in the financial industry. Due to this fact, investors should rather avoid such products, especially if the underlying is in a sideways trend for a long time.