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With geopolitical pressures at the forefront of markets in 2019, and likely in 2020 as well, a few top trading experts have advice on how to navigate on a day-to-day basis. One little-talked-about asset, mini crude-oil futures contracts, could be profitable on some days.
One of those experts, Bob Iaccino, chief market strategist of Path Trading Partners, breaks down how the contracts work:
"It's half the size of the regular crude-oil contract. So it's half the risk. The specs of the contract: 500 barrels instead of 1,000 and it is one of those things where the product itself gives pure exposure to the market or rather the commodity that you're looking at. [It's] something that kind of drives me crazy. Obviously, I have financial news on in the background all the time where I hear people say, `we think oil is going down, so what oil names should we look at?' as opposed to ... `if you think oil is going down, trade oil, right? Why are you trading something other than the thing you're looking at?' So the crude-oil contract gives you, obviously, exposure to crude oil, even USO, which is a very popular ETF that people will trade when they have an opinion on crude oil."
Here's an on-the-ground example of the advantage of buying the mini crude contract, rather than the main crude ETF:
"There was a day last October 11th, [and West Texas Intermediate] crude oil moved $1.40. USO moved 18 cents. And again USO is the oil ETF. If you were fortunate enough to buy the open and sell the close, you would have made about $515 in the mini crude contract. In the ETF, you would have made 18 cents per a USO contract that you bought," Iaccino said.