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# Oil Futures Trading: Did I Miss a 30% Move?
- URL: https://jimmakos.com/margin-trading-oil-futures/
- Published: 2020-04-17T17:22:34.000Z
- Updated: 2020-10-04T06:28:47.000Z
- Description: I was considering buying oil futures with leverage, when the market gained 30% overnight. Was I unlucky or too late? Neither, as I explain in this video.
- Author: Jim Makos
- Tags: Trading, Investing, Videos

*This is not investment advice. This video is made for entertainment.*

I was considering investing in oil just yesterday. Oil price has been hovering around 20 dollars, the lowest price in the last 18 years. Analysts speak of a bear market that can push oil price further down to even 10 dollars. As I was willing to accept that risk, I was considering investing in oil with margin.

## What’s margin trading?

It’s when I have a hundred dollars and I’m allowed to manage, say a thousand dollar position. That’s a 1 to 10 leverage. By doing so, any market move is multiplied by ten for my position, which means if oil dropped 10%, I would get a margin call as I would be 100% down! My broker would close my position since I would have lost my initial deposit.

![](https://storage.ghost.io/c/44/8d/448d9c80-c34d-4d74-8a89-3db10bee06f2/content/images/2020/10/margin-trading-what-is-buying-on-margin.png)

I wasn’t going to trade with a 1:10 leverage, since the maximum allowed in the US futures market is 1 to 2\. Here’s how I would do it.

Say I have 20,000 dollars to invest. At the moment I hold cash, gold and crypto. I was looking to turn some of my cash into oil futures. Specifically 10% of my investment capital. That means I was looking to risk 2 grand if oil dropped to $10\. Thus, I would buy oil futures with that money using 1:2 leverage. If oil plummeted to $10, I would stand to lose 2 thousand. If oil climbed to $40, I would make 200%. That’s a 2:1 risk-reward ratio.

![](https://storage.ghost.io/c/44/8d/448d9c80-c34d-4d74-8a89-3db10bee06f2/content/images/2020/10/futures-prices-600x1233-1.jpg)

![](https://storage.ghost.io/c/44/8d/448d9c80-c34d-4d74-8a89-3db10bee06f2/content/images/2020/10/oil-futures-1.jpg)

At the time of recording this, oil trades for $26\. So, would have I made 30% overnight? No, that’s not the case. This is the futures rollover. Don’t get me started explaining what’s that about. Long story short, oil still trades below 20 bucks. Is it a buy or a sell?