How to Hedge Your MCX Crude Oil
Today, we're going to talk about my crude oil hedging. These contracts are based on the actual oil price rather than whatever the spot price is today. Using these contracts you can enter in and out of trades for less, so it makes your money go a lot faster.
For example, let's say that you have an initial investment of $5,000 that you want to make back within one month. You know that you're going to price oil at $60 per barrel, so the cost of the contract is $0.40 per barrel. You want to make sure that you make back your initial investment because you don't want to lose money, but it's not really worth it if you lose money. That's why these contracts are so popular.
The oil market is often referred to as the world's largest commodity market, and the reason for that is that there is so much oil being traded. At any given time, there's two million barrels being traded in the futures market alone. This means that the commodities can change in value very quickly.
Since there is such a huge risk involved with futures, many people prefer to buy mcx crude oil derivatives instead. These contracts are alot safer because you're only investing for the value of the oil. You're not risking any money.
Hedging is a good strategy if you have a very short term goal that you want to achieve. The idea is to set a minimum investment for one month or a year. Then, you can hedge off one month to get started on the next goal for the same amount of money.
Another way that you can hedge is by holding one contract, like oil, for a while and then selling it when you like the price of the contract. When you get into a good position, you will make money. If not, you'll make a profit. This is the biggest advantage of these contracts.