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How Commodities (Brent, Crude and Nat.Gas) prices are derived
PrimeXBT Commodities trading has many advantages for investors who are only interested in price speculation. We offer hassle-free trading access to these contracts with no need to worry about the expiration and ‘rollover’ to the next month.
A Commodity's (BRENT, CRUDE and NAT.GAS) price is derived as a combination of the first and second nearby month future contract. The price for each of these instruments is derived from a weighted average between the 1st and 2nd month Future Contracts (explained in further detail below) and follows the business day convention from New York.
This pricing method diminishes the level of volatility when the first nearby futures contract is near expiration, since there is often lower liquidity. Furthermore, rolling your position from the 1st to 2nd nearby month happens in smaller daily increments, instead of paying the full difference when close to expiration.
Pricing of PrimeXBT Commodities (BRENT, CRUDE, NAT.GAS)
The price of PrimeXBT Commodities is determined in accordance with the following formula:
D
The number of Commodity Business Days from (and including) Previous Expiration Date to (but excluding) the Roll Date.
NumDays
The number of Commodity Business Days from (and including) the Previous Expiration Date to (but excluding) the Next Expiration Date
Next Expiration Date
The date of expiration of the First Nearby Month
Previous Expiration Date
The date of expiration of the Previous Nearby Month that expired Immediately prior to the Roll Date.
Roll Date
The second Commodity Business Day after the current Business Day
Relevant Price
CRUDE: Underlying asset exchange is CME and the product is NYMEX WTI Light Sweet Crude Oil Futures;
NAT.GAS: Underlying asset exchange is CME and the product is NYMEX Henry Hub Natural Gas Futures;
BRENT: Underlying asset exchange is ICE (ICE Futures Europe) and the product is Brent Crude Futures
Example of Pricing
D = 11
NumDays = 20
Relevant price of First Nearby Month = 20 USD
Relevant price of Second Nearby Month = 25 USD
Financing Charges of Commodities
Commodities are a margined product; therefore, the traded value is financed through an overnight financing charge. If a position is opened and closed within the same trading day, it will not be subject to overnight financing charges.