Crude Oil Order Book

[rs1 10]

Hi,

 

Newbie question on NYMEX Crude oil futures. Looking at the book, it seems that there is very little size stacked up on the either side of the book and that the inside bids/ offers are not more than 5 or 10 contracts aside alot of the time. Compared to fixed income or even EUR futures, this seems to be a very thin book. Does this mean that if you wanted to buy 100 contracts, you would have to take out all the offers and incur the slippage and move the market to do so? I was under the impression that the NYMEX crude future was extremely liquid. I am clearly missing something here, can the experienced Crude traders please help out?

 

Thanks

[brownsfan019 17]

Which contract - CL or QM?

 

Note - as a newbie to oil, don't worry about dropping 100 contracts there. LOL.

[Guest forsearch]

I was under the impression that the NYMEX crude future was extremely liquid.

 

Your impression is correct. Not only is it liquid it is very volatile. As Brownie said, you shouldn't worry about 100 cars on the CL (or even QM for that matter) - focus on your entries and exits with 1 contract for the moment.

 

Keep in mind that a full dollar move in the price of oil is worth $1,000 US on the CL ($500 on the QM). With the current moves in crude, the margin is around $12,000 or so, although some brokers will let you "play crude" with as little as $2,000 margin. Truly a recipe for disaster, IMHO.

 

And as a side note, make sure that your broker properly supports the NYMEX on Globex. One of my brokers (Open E Cry) had a problem turning up their platform (OEC Trader) for the early opening on Sunday afternoon at 2:30pm ET, as they weren't fully online until after 4pm. Guess someone didn't get the memo over there again...:doh:

 

-fs

[rs1 10]

I thought I had replied to this this morning but it looks like it didn't take.

 

First of all, thanks for the replies guys.

 

I was looking at the CL October contract in particular. I am definitely not looking to do 100 contracts and am well aware of the volatility in this market! I am just trying to get an understanding of how a large player would move that type of size and how quickly and easily the market can get pushed around.

 

So am I right in assuming that if someone wanted to trade 100 contracts and were crazy enough to just do it, they could move the market quite substantially? or are those 1 lot, 2 lot bids/ offers just icebergs or is there something else going on there?

 

Thanks again

[Guest forsearch]

Who knows... and do I care? Of course not.

 

All I need to know is that the CL is volatile enough for me to use buck-wide stops and small 1 lot piker sizes when trading it.

[brownsfan019 17]

Who knows... and do I care? Of course not.

 

All I need to know is that the CL is volatile enough for me to use buck-wide stops and small 1 lot piker sizes when trading it.

 

I agree FS - why it's moving is of no concern to me either, just as long as it moves.

 

You normally use $1.00 stops there? A bit much for my tolerance.

[Guest forsearch]

I agree FS - why it's moving is of no concern to me either, just as long as it moves.

 

You normally use $1.00 stops there? A bit much for my tolerance.

 

Buck-wide fits the position size and volatility on CL. More size, tighter stops.

[rs1 10]

Yes I see what you mean, the trading side is more important to understand, I get that.

 

Perhaps someone with more knowledge of the intricacies of how these futures work could explain further. If anyone knows anything further regarding my questions above, I would be very grateful for any more information.

 

Thanks

[Guest forsearch]

Perhaps someone with more knowledge of the intricacies of how these futures work could explain further.

 

Sure. You're a newbie. We get that.

 

Go read a book if you really want to know. There are many out there for you to Google and download. Or buy from Amazon if you need a hardcopy.

 

Or you can go to the NYMEX website and CME Globex manual and read all about how orders are handled by the electronic matching algorithm.

 

We've all been there, done that.

 

A little self-help here goes a long way. So spend some time during RTH actually watching crude oil on the charts and the DOM and the T&S live as it happens. Get a feel for what you think is going on between the buyers and the sellers.

 

It isn't going to come together for you right away until you realize what is important in trading the markets and what isn't.

 

-fs

[rs1 10]

Fair enough, I will spend some more time looking it up and watching the book. I just thought may be there was someone on here who had real-world experience of trading these futures and could offer an insight that you can't get from the manuals or the books. That was the idea behind putting this out on the forum.

 

Cheers