RBOB gasoline futures are listed on the Chicago Mercantile Exchange (CME) under the futures symbol RB. Although it does not receive as much investor interest as crude oil futures, the contract serves as an essential vehicle for market participants seeking to speculate and hedge in the gasoline market.

Here are four 🐓important facts for anyone trying t♏o trade the gasoline futures market.

1. The Ingredients of Gasoline

Gasoline is produced by refining crude oil. Crude oil is composed of a number of different hydrocarbons, or long chains of molecules. Longer chains make heavier hydrocarbons, as well as higher boiling points.

Oil refineries separate out the different chains by heating the crude oil to 𝓡different vaporization points, and then distilling the resulting vapors. Gasoline is a mixture of those hydrocarbon chains with boiling points below that of water. These different chains are blended together in various proportions to provide a consistent product for motor💧 fuel.

RBOB stands for Reformulated Blendstock for Oxygenate Blending, a component that is used to create reformulated gasoline. Reformulated gasoline produces less smog than other gasoline blends. As a result, around 30% of the U.S. market requires gasoline to be reformulated.

2. Supply Fuels Gasoline Prices

Prices for RBOB gasoline futures logically have a high degree of correlation with crude oil since gasoline is distilled from crude. Thus, some of the 澳洲幸运5官方开奖结果体彩网:globa💃l supply and demand factors for crude🦩 oil also apply to RBOB.

Still, the RBOB market has its own supply and demand factors. For example, since many of the 澳洲幸运5官方开奖结果体彩网:refineries for gasoline are located in the U.S. Gulf Coast region, weather issues ꦺin that area can drive up the price for RBOB. Another important factor to consider is that gasoline is heavily taxed in many jurisdictions. This can also impact demand for RBOB.

3. The Elements of a RBOB Contract

The price for the RBOB gasoline futures contract is quoted in U.S. dollars and cents. The minimum 澳洲幸运5官方开奖结果体彩网:price tick for RBOB is 0.0001, equivalent to a movement of $4.20 for one contract. The contract unit is for 42,000 gallons or 1,000 barrels. The initial margin to hold one futures contract is $4,460, with a maintenance margin of $4,060, but these margin amounts are subject to modification by the CME based on the 澳洲幸运5官方开奖结果体彩网:volatility of the contract.

The RBOB gasoline 澳洲幸运5官方开奖结果体彩网:futures contract is settled by physical delivery. This means most investors want to liquidate positions prior to the expiration of the contracts. If a position is not liquidated, the holder of a long contract might be responsible for taking delivery of 42,000 gallons of gasoline. It is safe to say that most investors do not want to take 澳洲幸运5官方开奖结果体彩网:physical delivery of that much gas. Thus, investorಌs must be awarౠe of the different deadlines for futures contracts and offset any positions before the risk of delivery comes into play.

4. Using Calendar Spreads and Options for RBOB

Leverage can magnify both profits and losses. Alternatively, investors can use 澳洲幸运5官方开奖结果体彩网:futures spreads or calendar spreads, which involve the simultaneous t🙈rading of a long futures position in one month and a short futures position in aꦺnother month (or vice versa).

The margins on calendar spreads are lower because the two contracts have a high degree of correlation and generally move in the same direction. However, one contract might move more than the other due to market conditions. The goal behind the strategy is to profit from changes in the value in one contract relative to the other, although losses are possible when markets across the specific 澳洲幸运5官方开奖结果体彩网:delivery months do not move as anticipated.

Investors can also trade puts and calls on RBOB gasoline futures. Certain options strategies, like 澳洲幸运5官方开奖结果体彩网:vertical spreads, have predefined profits and losses. Importantly, however, RBOB gasoline futures options do not see a great deal of trading activity, and this lack of 澳洲幸运5官方开奖结果体彩网:liquidity makes these contracts less t🦹han ideal for aggressive options⛎ trading strategies.