When buying a barrel of oil on the stock exchange, where does the physical oil go?

I mean do they send you a barrel of oil to your address?When buying a barrel of oil on the stock exchange, where does the physical oil go?
Well, first you don't buy oil on the stock exchange. You purchase it along with other commodities at a commodity exchange, like the Chicago Board of Trade.


Next, you are not buying a barrel of oil, but what is known as a contract. I believe with oil it is 5 or 10,000 barrels per contract.


Third, you are not buying for today, but for some time in the future, usually 3 to 6 months. That is why they are called futures.


Investors dispose of the futures before the actual call date, but if you wanted to keep the future to call, you would have to designate a storage terminal and arrange shipment from the oil field.


This is actually a simplification of the process. There are a lot of additional variables. Like type of crude (North Sea Brent, West Texas Sweet, etc.).


Most investors are purchasing on margin. That is, they are borrowing money from the exchange while only putting up a relatively small amount of cash. It is very risky. 80% of the people who invest in commodities loose their @ss.





As an example lets say you bought a 5000 barrel contract on West Texas crude and put up $10,000. Every time the price goes up $1 you make $5000. Everytime the price falls $1 you loose $5000. If the price falls more the $2 you will get a margin call from your broker. If you don't come up with the additional money to cover the loss you loose the contract and your $10000 is gone.


It is one investment where you can actually loose more money than you initially invested.When buying a barrel of oil on the stock exchange, where does the physical oil go?
it usually takes 7-10 business days but all the neighbors will want to get in on your oil so its an easy way to make a profit just make sure your there to sign for the package or else the ups truck will leave it there and bam you lose all your money because that old lady with the cats cant get enough of her oil fix and will steal yours. But do remember that when you sell the barrel of oil you have to send it back.





I remember this one time I got a hold of some great Columbian oil so i siphoned it out and replaced it with synthetic, Columbian is the best u can get it has a very pungent smell and a unforgettable after taste. many will agree with me here.
In my gas tank.

Birds