Trading Energy Commodities - dummies

By Nick Hodge, Jeff Siegel, Christian DeHaemer, Keith Kohl

Part of Energy Investing For Dummies Cheat Sheet

If you’re interested in trading energy commodities (such as coil, oil, or natural gas) you’ll need at least one of the following persons working for you depending on if you are making the decisions or you want to yield to a professional energy investor:

  • Futures Commission Merchant (FCM): An FCM can solicit and accept, buy, or sell orders for commodity futures and options. If you want to make all the decisions, all you need is an account with a Futures Commission Merchant.

  • Introducing Broker (IB): If you want to work with a professional to make commodity trading decisions, you should hire an Introducing Broker. This person will help you make decisions based on individual needs, and will submit the trades for you.

  • Commodity Trading Advisor (CTA): You can hire a CTA to give you commodity trading advice or give them full authority over your account. They can make decisions and execute trades without any input from you.

You can learn more about each at the National Futures Association or the National Introducing Brokers Association.

Additionally, you should know which commodities trade on which exchanges:

  • Chicago Mercantile Exchange (CME): crude oil, natural gas, coal, biofuels, electricity, refined products, and petrochemicals

  • Intercontinental Exchange (ICE): coal, crude oil, refined products, electricity, and natural gas