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The Nuances of WTI Crude Oil Contract Specifications

September 23, 2021 by Daniels Trading| Tips & Strategies

The Chicago Mercantile Exchange (CME) is a global leader in the trade of derivative products. One of the CME’s most popular offerings is West Texas Intermediate (WTI) crude oil. Listed as a standardized futures and options contract, WTI is the world’s benchmark for the trade of light sweet crude.

For aspiring energy traders, understanding WTI crude oil contract specifications is imperative. In this blog post, we’ll break down the trading essentials for these exciting derivative markets.

CME Futures and Options WTI Crude Oil Contract Specifications

In the realm of active trading, WTI crude oil futures and options are exceedingly popular products. No matter whether you’re interested in speculating on price movements or hedging risk, CME WTI futures and options can help.

WTI Crude Oil Futures

West Texas Intermediate futures are an excellent barometer for the global oil trade. First launched by the New York Mercantile Exchange (NYMEX) in 1983, WTI futures are the go-to derivatives product for the trade of light sweet crude oil.

In March 2008, CME Group acquired the NYMEX and management of WTI crude oil. With a robust average daily trading volume of nearly 1.2 million contracts and open interest upward of 2 million contracts, this CME listing offers the utmost in liquidity. Here are the WTI crude oil contract specifications per the CME:

Symbol CL
Availability CME Globex
Quantity 1,000 barrels
Pricing U.S. dollars and cents per barrels
Tick Size 1 tick = $0.01 per barrel
Tick Value 1 tick = $10.00
Settlement Physical delivery
Listed Contracts Contracts are listed monthly for the next 10 calendar years and two months
Expiration Trading terminates three business days before the 25th
of the contract’s preceding calendar month

WTI Crude Oil Options

A WTI options contract gives the holder the right—but not the obligation—to buy or sell a specified quantity of crude oil at a predefined price on some forthcoming date in time. Options for WTI crude oil are known as “futures options” because WTI futures is the basis for the contract’s valuation.

Here are the WTI crude oil contract specifications for options:

Symbol LO
Availability CME Globex
Quantity 1,000 barrels
Pricing U.S. dollars and cents per barrels
Minimum Price Fluctuation $0.01 per barrel = $10.00
Settlement Physical delivery
Listed Contracts Contracts are listed monthly for the next 10 calendar years and two additional months
Expiration Trading terminates seven business days before the 26th of the month prior to the contract month

Compared to standard futures, options contracts are a bit more involved. Here is a brief primer on crude oil options basics:

  • Strike price: Strike price is the price at which the option may be bought or sold at expiry.
  • Call: A call option gives the holder the right to buy WTI futures at strike on some forthcoming date in time.
  • Put: A put option gives the holder the right to sell WTI futures at strike on some forthcoming date in time.
  • Buy: When you buy WTI calls or puts, you pay a premium for a bullish (call) or bearish (put) position in the market. Risk is limited to the premium paid, and profits are potentially unlimited.
  • Sell: When you sell WTI calls or puts, you receive a premium for “writing” the contract. Revenue is realized from the sale, but your risk is potentially unlimited.

For options traders, the important WTI crude oil contract specifications are quantity and strike price. As the number of contracts bought or sold increases, market exposure and risk grow.

Also, the location of strike relative to WTI’s current price is vital to the trade’s success. Contact values hinge on the relationship of market price to strike. In-the-money (ITM) and at-the-money (ATM) contracts typically feature lower assumed risk and higher premiums than out-of-the-money (OTM) contracts.

Putting WTI Crude Oil Futures and Options to Work for You

The first step in trading any market successfully is understanding the basics. For energy traders, having a working knowledge of WTI crude oil contract specifications for futures and options is essential.

Familiarize yourself with today’s vast global crude oil market in this Introduction to Crude Oil course. Explore the fundamentals of modern energy markets, which can have a significant impact on many of the world’s leading economies. Sign-up for the free course An Introduction to Crude Oil.

Introduction to Crude Oil: Online Course

Filed Under: Tips & Strategies

About Daniels Trading

Daniels Trading is division of StoneX Financial Inc. located in the heart of Chicago’s financial district. Established by renowned commodity trader Andy Daniels in 1995, Daniels Trading was built on a culture of trust committed to a mission of Independence, Objectivity and Reliability.

Risk Disclosure

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.

Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.

© 2023 StoneX Group Inc. All Rights Reserved

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Risk Disclosure

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.

Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.

© 2023 StoneX Group Inc. All Rights Reserved

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