Crude oil prices have been capturing many news headlines worldwide, be they are falling or rising. The OPEC was also determined to increase output if crude oil prices continue to spurt.
What is a crude oil futures option? A crude oil futures option is the right but not the obligation to buy (call) or sell (put) 1000 barrels of crude oil for a certain price (strike price) by a certain period of time (expiration date). A hypothetical example might be buying 1 June $65 crude oil futures call option for a premium cost of $1000. The person speculating on this particular crude oil futures call option is hoping for the price of June crude oil futures to increase enough for them to sell (offset) the option for a profit anytime before the option expires.
There are various futures contracts that are closely related to crude oil futures because they are made from crude oil such as heating oil futures and unleaded gas futures. Crude oil futures options and unleaded gas futures options investing are very risky and are not suitable for all investors. Why are crude oil futures contract prices quoted in barrels and heating oil futures and unleaded gas futures contracts are quoted in gallons? It is less confusing to have different contract quotes for the distillates of crude oil and the crude oil itself.
Current crude oil prices are very high compared to their cost say a decade ago. The US government however does influence the cost of current crude oil prices and will continue to influence the prices. Could it be the decrease in crude oil in general? Crude oil prices could be better if the government created a better plan of how to use the crude oil.