When it comes to commodities, energies are an exceedingly popular asset class. And, within the energies segment, West Texas Intermediate (WTI) crude oil is a go-to product for many active traders.
Let’s take a closer look at CME Micro WTI futures. Read on to learn more about this exciting contract and to discover a few tips on how to trade futures based on “Texas tea.”
The Chicago Mercantile Exchange (CME) has a storied history of developing new derivatives markets. One of the CME’s more intriguing innovations came in 2019 with the launch of Micro E-mini equities futures.
The CME’s idea behind introducing Micro E-mini equities was to provide traders a way of engaging DOW, S&P 500, NASDAQ, and Russell 2000 futures on a reduced scale. Ultimately, the Micro E-minis were well received. Traded volumes rapidly grew, establishing a daily handle of more than 4 million contracts multiple times (February 2021).
According to the CME Group’s Tim McCourt, Micro E-mini equities quickly became a resounding success:
“Since their introduction in May 2019, we’ve seen strong growth and participation across Micro E-mini Equity Index futures and options, including among sophisticated, active traders.”
In an attempt to capitalize on the demand for smaller futures contracts, the CME turned its attention toward one of its benchmark products: WTI crude oil. Since their July 2021 debut, Micro WTI crude oil futures have exhibited their growth potential. Within a month, CME Micro WTI futures exceeded 1 million traded contracts, making it one of the exchange’s featured products.
If you’ve ever read a book on how to trade futures, then you’ve been briefed on the topic of contract specifications. Contract specifications formally outline the details of the agreement being made between the contract’s buyer and seller. Without a set of specs, a futures contract would be more like a pari-mutuel wager, not a standardized security.
Here are the key specs for the CME Micro WTI contract:
| Symbol | MCL |
| Market | CME Globex |
| Denomination | 100 barrels |
| Minimum Tick | U.S. dollars and cents |
| Tick Value | $1.00 per tick |
| Listing | Monthly for 12 consecutive months and an additional June and December |
| Settlement | Financial |
Micro WTI futures are traded electronically on the CME Globex from Sunday at 6:00 p.m. EST to Friday at 5:00 p.m. EST. Also, it’s important to note that the market is halted for one hour every day between 5:00 p.m. EST and 6:00 p.m. EST. As long as the market is open for business, you are free to buy and sell MCL via mouse click, bracket order, or automated system.
Often, traders are so concerned with learning how to trade futures that they forget all about the why. For the Micro WTI, there are many reasons to actively buy and sell contracts:
WTI futures are among the CME’s most popular commodity futures offerings. As a general rule, WTI experiences robust participation and consistent volatility between the hours of 9:00 a.m. EST and 2:30 p.m. EST. Because Micro WTI futures are based on the standard WTI contract, these hours offer participants ideal trading conditions.
Micro WTI margin requirements are vastly reduced when compared to the full-sized WTI. Initial margins are in the neighborhood of $550, whereas intraday margins are typically less than $300. So, for a minimal capital outlay, you can become active in the global oil complex and control positions far in excess of dedicated capital.
For active traders, the term granularity refers to the incremental increase or decrease of a position’s size. The Micro WTI contact gives you optimal granularity because you can adjust position sizes up or down in small increments. The result is fully customizable market exposure via tailored position sizing.
The reduced maintenance margins and granularity of Micro WTI crude open the door to countless trading strategies. For instance, you’re free to scale in and out of multi-lot positions on intraday, swing, or longer-term time frames. With Micro WTI futures, the sky is your strategic limit!
At one-tenth the size of conventional WTI futures, the Micro WTI contract provides energy traders with the utmost flexibility. From long-term investment and portfolio management to intraday scalping, you can adapt Micro WTI crude oil futures to a wide range of situations.
If you’re interested in learning how to trade futures, then you’d be well-advised to first understand market dynamics before hitting that “Buy” or “Sell” button. Fortunately, for oil traders, the StoneX e-book Introduction to Oil Futures has the global energy complex covered.
Introduction to Oil Futures takes a deep dive into the benefits of trading crude oil, contract specs, market fundamentals, and much more. If you’re gearing up to take the plunge into the global oil complex, be sure to download your free copy without delay!