Heating Oil Futures Options Trading News

Free Heating Oil Futures Trading Guide

Heating Oil Futures and Options

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Heating Oil Futures

Heating oil is also called a distillate or Number 2 oil. NY Harbor ULSD Futures

When crude oil is refined, about 25 percent of the oil becomes heating oil and about 50 percent becomes gasoline. Heating oil is primarily used to heat homes in the Northeast.

The United States produces about 85 percent of its heating oil, while the remainder is imported from Canada, the Virgin Islands and Venezuela.

Oil companies begin to ramp up production of heating oil before the winter season begins to ensure ample supplies of heating oil to meet the winter demand.

Heating Oil Futures Reports:

The main report for heating oil is the EIA Weekly Energy Stocks report.

Weather during the winter months of December, January and February are critical to watch.

Trading Heating Oil Futures:

The biggest opportunities for a quick rise in price occurs during the winter months. Unexpected or prolonged periods of extreme cold in the Northeast will typically cause sharp rallies in the price of heating oil futures. Simply buying heating oil futures in the winter is not a "no-brainer" trade. It gets cold every winter; the catch is that the weather has to be colder than expected and more heating oil needs to be consumed than anticipated for the season. Be alert to brokerage firms that try to sell you on far out of the money call options as a sure bet. Heating Oil prices typically follow crude oil.

Who Uses the NYMEX Division Heating Oil Futures Contract?

The NYMEX Division heating oil futures contract can help most sectors of the oil industry -- refiners, wholesale marketers, and retailers.

Traders can also use the NYMEX Division heating oil and gasoline contracts in tandem with crude oil futures to lock in the "crack spread" or theoretical refining margin.

NY Harbor ULSD (Physical) futures are an outright heating oil contract between a buyer and a seller. The contract:
Is based on what is also known as No. 2 fuel oil, which accounts for about ¼ of the yield of a barrel of crude, the second largest "cut" after gasoline Is used to hedge diesel fuel and jet fuel, both of which trade in the cash market at an often stable premium to heating oil futures

Things to know:

  • Traded via open outcry and electronically on CME Globex
  • Based on delivery in New York harbor, the principal cash market trading center
  • Option types:  calendar spread, crack spread, and average price
  • Trading at settlement is available for the front two months except on the last trading day and is subject to the existing TAS rules

Since NYMEX Division heating oil futures are traded over 18 consecutive months, traders can implement hedging strategies that encompass two winter heating seasons.

Heating Oil Futures Contract Specification

Product Symbol HO

Venue CME Globex, CME ClearPort, Open Outcry (New York)

Hours
(All Times are New York Time/ET)

CME Globex: Sunday – Friday 6:00 p.m. – 5:15 p.m. (5:00 p.m. – 4:15 p.m. Chicago Time/CT) with a 45-minute break each day beginning at 5:15 p.m. (4:15 p.m. CT)

CME ClearPort: Sunday – Friday 6:00 p.m. – 5:15 p.m. (5:00 p.m. – 4:15 p.m. Chicago Time/CT) with a 45-minute break each day beginning at 5:15 p.m. (4:15 p.m. CT)
Open Outcry: Monday – Friday 9:00 AM to 2:30 PM (8:00 AM to 1:30 PM CT)

Contract Unit 42,000 gallons

Price Quotation U.S. dollars and cents per gallon

Minimum Fluctuation $0.0001 per gallon

Maximum Daily Price Fluctuation Initial Price Fluctuation Limits for All Contract Months. At the commencement of each trading day, there shall be price fluctuation limits in effect for each contract month of this futures contract of $0.25 per gallon above or below the previous day's settlement price for such contract month. If a market for any of the first three (3) contract months is bid or offered at the upper or lower price fluctuation limit, as applicable, on CME Globex it will be considered a Triggering Event which will halt trading for a five (5) minute period in all contract months of the HO futures contract, as well as all contract months in all products cited in the Associated Products Appendix of rule 150.07. Trading in any option related to this contract or in an option contract related to any products cited in the Associated Products Appendix which may be available for trading on either CME Globex or on the Trading Floor shall additionally be subject to a coordinated trading halt.

Termination of Trading Trading in a current month shall cease on the last business day of the month preceding the delivery month.

Trading at Settlement (TAS) Trading at settlement is available for spot (except on the last trading day), 2nd, 3rd and 4th months and subject to the existing TAS rules. Trading in all TAS products will cease daily at 2:30 PM Eastern Time. The TAS products will trade-off of a "Base Price" of 0 to create a differential (plus or minus 10 ticks) versus settlement in the underlying product on a 1 to 1 basis. A trade done at the Base Price of 0 will correspond to a "traditional" TAS trade which will clear exactly at the final settlement price of the day.

Trade at Marker (TAM) Platts TAM trading based on the Platts 3:15PM (Eastern Time) Futures Assessment, will be available in the first two (2) contract months of HO and in calendar spreads between the first and second contract months.

TAM trading is analogous to our existing Trading at Settlement (TAS) trading wherein parties will be permitted to trade at a differential that represents a not-yet-known price. TAM trading will use a marker price, whereas TAS trading uses the Exchange-determined settlement price for the applicable contract month. As with TAS trading, parties will be able to enter TAM orders at the TAM price or at a differential between one and ten ticks higher or lower than the TAM price. Trading at marker is available for spot month on the last trading day.

NY Harbor ULSD Futures (HO) spot, 2nd and 3rd months and nearby/second month, second/third month and nearby/third month calendar spreads.

No-Activity Periods:
4:30 p.m. London time – 5:50 p.m. Eastern time Monday – Thursday
4:30 p.m. London time Friday – 5:20 p.m. Eastern time Sunday

Listed Contracts Current Year + 3 Years + 1 Month

Settlement Type Physical

Settlement Procedure Daily NYMEX Energy Futures Settlement Procedure (PDF)

Final NYMEX Energy Futures Settlement Procedure (PDF)

Delivery Period Please see rulebook chapter 150 

Position Limits NYMEX Position Limits 

Rulebook Chapter 150 

NY Harbor ULSD Option

Underlying Futures NY Harbor ULSD Futures (HO)

Product Symbol OH

Venue CME Globex, CME ClearPort, Open Outcry (New York)

Hours
(All Times are New York Time/ET)

CME ClearPort: Sunday – Friday 6:00 p.m. – 5:15 p.m. (5:00 p.m. – 4:15 p.m. Chicago Time/CT) with a 45-minute break each day beginning at 5:15 p.m. (4:15 p.m. CT)

CME Globex: Sunday – Friday 6:00 p.m. – 5:15 p.m. (5:00 p.m. – 4:15 p.m. Chicago Time/CT) with a 45-minute break each day beginning at 5:15 p.m. (4:15 p.m. CT)
Open Outcry: Monday – Friday 9:00 AM to 2:30 PM (8:00 AM to 1:30 PM CT)

Contract Unit A NY Harbor ULSD Put (Call) Option traded on the Exchange represents an option to assume a short (long) position in the underlying futures contract traded on the Exchange.

Price Quotation U.S. dollars and cents per gallon.

Option Style American

Minimum Fluctuation $0.0001 per gallon

Expiration of Trading Expiration occurs three business days before the expiration of the underlying futures contract.

Listed Contracts Current Year + 3 Years + 1 Month

Strike Prices Twenty strike prices in $0.01 per gallon increments above and below the at-the-money strike price, and the next 10 strike prices in $0.05 increments above the highest and below the lowest existing strike prices for a total of at least 61 strike prices. The at-the-money strike price is the nearest to the previous day's close of the underlying futures contract. Strike price boundaries are adjusted according to the futures price movements.

Settlement Type Exercise into Futures

Position Limits NYMEX Position Limits 

Rulebook Chapter 320 

Exchange Rule These contracts are listed with, and subject to, the rules and regulations of NYMEX.


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