As a trader, understanding the concept of Crude Oil expiry date is crucial for navigating the dynamics of online commodity trading.
These expiry dates determine the final trading day for a particular contract on the Multi Commodity Exchange (MCX), signifying the deadline for settlement.
To help you understand this better, we will discuss the Crude Oil expiry date on MCX and how it can impact trading.
What Does Crude Oil Expiry Date Mean?
The Crude Oil expiry date holds significant meaning in the world of commodity trading, particularly in the context of Crude Oil futures and Crude Oil option contracts on MCX.
The expiry date refers to the specific date when a commodity futures or options contract comes to an end, with the same logic applying to Crude Oil futures and options expiry as well.
In essence, the expiry date is the final trading day for that particular contract, beyond which the terms of the contract agreement become invalid.
When the expiry date arrives, you have two choices. You can either settle the contract by physically delivering the commodity or offset your position by executing an opposite trade.
Exchange-traded contracts for Crude Oil are settled on a cash basis and physical delivery does not take place. Physical settlement is more relevant for oil producers and buyers.
For you as a trader, understanding the Crude Oil expiry date is crucial as it affects pricing, trading strategies, and trade based on market sentiment around the expiry date. You’ll notice this pattern across the MCX market time in 2023.
Crude Oil Expiry Date MCX
Here is the list of all Crude Oil expiry dates in the year 2024.
Factors That Can Affect Crude Oil Prices at Expiry
There are many factors that affect Crude Oil prices. Consider these crucial factors while trading around Crude Oil option expiry date and future expiry date on MCX.
1. Global Demand
Crude Oil prices depend on worldwide demand. Your use and that of billions of others directly affect Crude Oil demand.
Demand for oil depends on economic growth, industrial activity, transportation needs, and consumer behavior.
When global demand rises, oil prices tend to increase due to limited supply and higher competition among buyers. Conversely, a decline in global demand can lead to lower oil prices as suppliers adjust their production levels to match reduced consumption.
You need to pay attention to this factor if you are planning to trade Crude Oil at expiry. This factor is true not just for Crude Oil but also Agri Commodities in India.
2. Currency Exchange Rates
Currency exchange rates can considerably affect Crude Oil import costs. A weaker native currency raises Crude Oil prices, whereas a stronger currency lowers them. Thus, currency exchange rates determine Indian Crude Oil prices and should be specifically accounted for while trading near expiry.
3. Crude Oil Inventory Levels
Crude Oil inventory levels hold significance in determining prices. Higher inventories suggest oversupply, leading to lower prices, while lower inventories indicate a tighter market, potentially causing prices to rise.
Monitoring inventory levels helps gauge the supply-demand balance and provides insights into the direction of Crude Oil prices in India.
You can take the example of the geopolitical crisis due to Russia’s invasion of Ukraine which impacted the global Crude Oil supply and also impacted its prices.
Such instances at expiry can have a significant impact on your trade and thus you must keep an eye on the market news.
4. Environmental and Regulatory Factors
Environmental and regulatory factors can affect Crude Oil prices. Government policies and international agreements on environmental protection and climate change, such as carbon emission regulations and support for renewable energy sources, impact the long-term demand for oil.
If such measures are declared near the expiry date of oil contracts, they can influence Crude Oil prices by shaping market dynamics and trader sentiment.
How to Trade Crude Oil Contracts?
If you are interested in trading Crude Oil derivatives, here are some steps to get you started:
1. Educate Yourself
Learn about the basics of futures and options trading and specifically understand how Crude Oil futures work. Familiarize yourself with terminology, market dynamics, and factors influencing Crude Oil prices.
Image of Crude Oil futures shown on charts with Heikin Ashi candles
2. Choose a Broker
Select a reputable commodity broker like Dhan that offers access to Crude Oil futures trading. Ensure the brokerage provides the necessary tools, platform, and resources for trading futures contracts.
On Options Trader by Dhan, for example, you can build and execute custom strategies for trading Crude Oil F&O from one platform.
3. Open an Account
Follow the account opening process with your chosen brokerage. Provide the required information and complete any necessary documentation. Fund your trading account with the initial deposit.
4. Research and Analyze
Stay informed about the latest news, market trends, and factors affecting Crude Oil prices. Find trading opportunities using technical and fundamental analysis.
5. Develop a Trading Strategy
Create a well-defined trading plan that outlines your goals, risk tolerance, entry and exit strategies, and position sizing. Avoid emotional decisions and follow your approach.
6. Monitor and Execute Trades
Monitor Crude Oil price movements and execute trades based on your analysis and trading plan. Use limit orders or stop-loss orders to manage risk and protect your positions.
Being aware of the Crude Oil option expiry dates or future expiry dates is crucial for anyone involved in the oil industry or commodity trading. The expiry dates help you make informed decisions to trade this energy commodity.
By staying updated and trading based on these expiry dates, you can ensure optimal returns and risk management in place. Remember, stay informed and stay ahead in the world of Crude Oil trading.