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Coach's Playbook Posted by Team Topstep April 22, 2020

Crude Oil Goes Negative - The Coach’s Playbook

Crude Oil Rig

Can you really get paid to take delivery on a crude oil contract? Yeah, you actually can, but what are you going to do with it? A single crude oil futures contract is the equivalent of 1,000 barrels, or 42,000 gallons of unrefined oil, and if you’re planning to take delivery on it, then you better have a place to store it that isn’t your swimming pool!

Here’s What Our Coach’s Have To Say 

Where Should We Dump Your Beans, Sir!

I can’t imagine anything scarier for a day trader than being forced to take physical delivery of a commodity because they couldn’t get out of a position before the contract expired. All the old stories they used to tell to frighten potential speculators out of entering the markets are most likely buried in a dusty tome somewhere, waiting for someone to find them.

Things like that just don’t happen anymore, or do they? Risk managers and clearing house staff are usually pretty good at cleaning up messes like this for unwitting traders, but you’d still think that with the advances in technology the industry has made over the last few decades, situations like this would be totally obsolete. Well, once the puke fest we’re presently witnessing in crude oil starts to die down, I’ll bet we see a few new stories start to leak out.

Know What You’re Trading

The single best way to avoid a potential delivery debacle is to know the product you’re trading inside and out. That means learning everything; contract size, tick value, contract months, volume, open interest, rollover dates and especially the last trading day (obviously there’s more). There’s not much you can’t find out about a futures product by going straight to the CME Group website. It’s a great resource, and it’s there for a reason.

This has been a historical year for the markets, and there’s no sign of the craziness slowing down, so make sure you keep yourself as informed as possible. You’ll thank yourself later.

If you have, or know of a good story about taking delivery of a commodity, please feel free to share it in the comments section below, we love that stuff!

Trade Well!