Trading the price of oil using Nadex Knock-Outs

Learn how to trade on the price of oil with limited risk using Nadex Knock-Outs.

In this video you’ll learn:

  • How to go long or short on the underlying crude oil market.

  • How knock-outs work by limiting your risk and protecting your profits.

  • How to make your prediction using the Nadex platform.

Watch this simple tutorial and you’ll be trading crude oil contracts in no time.

Trading the price of oil using Nadex Knock-Outs: video summary

In this video, we’ll show you how to go long or short on oil with limited risk/reward using Nadex Knock-Outs.

Step 1: log in to your Nadex trading account

Click  ‘knock-outs’ and then ‘commodities’. Under ‘crude’ you’ll see the knock-out ranges currently available. Knock-outs have a weekly expiration.

Step 2: click on a contract

This will populate a chart showing the price of oil, and bring up an order ticket.

You’ll see the contract specifics on your order ticket. This includes the range, the current indicative price, and the expiration. For crude oil, the range is always $5. These are the terms of the knock-out contract:

This Crude Oil (Sep) 38.50-43.50 contract expires @ 2:30 p.m. ET at the end of the week.

Step 3: buy or sell

If you predict the price of oil is going up, you ‘buy’. If the range boundaries are hit, you’ll be knocked out of the trade. The upper limit (43.50) means a profit, the lower limit (38.50) means a loss.

If you predict the price of oil is going down, you ‘sell’. You’ll make a profit if the lower limit is hit (38.50), or take a loss if the upper limit is hit (43.50).

The prices of knock-outs constantly fluctuate as the underlying price of oil changes. Price levels will typically track the underlying price of oil. If the indicative underlying price was 41.03, you might see a bid-ask spread of 41.01 to 41.05.

Essentially, when trading knock-outs, you predict whether the price of oil is going up or down. You can identify which knock-out range best suits your trade using Nadex charts.

Your maximum potential profit or loss is shown on your order ticket before you enter a trade.

Step 4: wait until expiration or close out early

This can lock in profits or limit losses. To close a long position, sell it at the current market price. To close a short position, buy it back at the current market price.

If the price of oil doesn’t hit the upper or lower range, the profit or loss will be the difference between the price level you bought (or sold) at, and the settlement price, excluding any exchange fees.

And there you have it. You can now leverage Nadex Knock-Outs to trade the price of oil.

Try trading oil knock-outs for free

Download a Nadex demo account. You’ll get $10,000 in virtual funds, so you can practice trading knock-outs on your terms.

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