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New underlying for Mini Futures: Brent Crude Oil Future

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Vontobel Markets
22 Nov 2023 | 4 min read
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With mini futures, you can leverage the performance of the underlying asset with a small capital investment. You can invest in either a rising or falling market. Now it is also possible with a new underlying: Brent Crude Oil Future

Oil dips persist: demand outlook signals growing concerns

Recent oil price dips, geopolitical tensions, and uncertainties related to Chinese exports create an intricate economic environment. As Brent crude approaches $82 a barrel, Saudi Arabia and Russia announce commitments to maintain production cuts, defying the risk of further declines.

Learn more about the challenges and strategies that are shaping the present of the global oil sector.

Oil prices have hit new two-and-a-half-month lows, and rising tensions in the Gaza Strip could further limit demand and exacerbate the price decline. Also fueling fears of weakening global demand are Chinese data showing a larger-than-expected drop in total exports of goods and services in the world's second-largest economy, and some uncertainties about the end of the Federal Reserve's tightening monetary policies. Brent crude, the global benchmark for oil prices, traded below $82 a barrel after a 4.2 percent drop during the week.

On the supply side, Saudi Arabia and Russia, the world's largest oil exporters, have confirmed their willingness to continue production cuts through the end of 2023 to prevent prices from falling further. After production cuts during the summer, oil prices had risen to nearly $98 a barrel in September before trading back around $85 a barrel last Friday.

Brent Crude Oil (USD), Five year weekly chart

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Source: Bloomberg, 17.11.2023. Note: Past performance is not a reliable indicator of future performance.

OPEC+, the world's largest organization of oil-producing countries, led largely by Saudi Arabia, has been cutting production since the beginning of the year in a preemptive effort to maintain market stability and prevent further declines in oil prices. Saudi Arabia announced that it will continue to reduce production by 1 million barrels per day compared to 2022, thus producing about 9 million barrels per day until the end of the year. Russia also confirmed its decision to reduce its oil exports by 300 thousand barrels per day until the end of the year.

WTI Light Sweet Crude Oil Future (in USD), Five year weekly chart

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Source: Bloomberg, 17.11.2023. Note: Past performance is not a reliable indicator of future performance.

What are Mini Futures?

Mini Futures are exchange-traded products that allow you to participate in the price increase or decrease of a specific underlying asset. They have no pre-defined maturity date (open-end) and mature automatically when the Stop Loss level (“Barrier”) is reached, at which point trading in the product ends. Mini Futures allow you to invest either in the underlying asset:

  • A rise in value (Mini Futures Long)
  • A fall in value (Mini Futures Short)

How does leverage work?

Leverage allows disproportionate participation in the performance of the underlying asset with a small capital investment. As an investor, you pay only a small part of the price of the underlying and Vontobel, as the issuer, funds the rest. The pricing is very transparent and can be calculated directly from the value of the underlying. The so-called 'strike' is the part of the underlying that is financed by the issuer. The financing level (strike) is paid interest for the investment period and is reviewed daily. The intrinsic value of a Mini Future can be calculated as the difference between the price of the underlying and the strike.

The leverage is easily calculated by dividing the value of the underlying by the value of the Mini Future. Leverage changes with changes in the value of the underlying, as the amount of leverage is based on the difference between the underlying and the financing level:

  • Mini Futures long: the higher the financing level or strike is compared to the value of the underlying asset, the greater the leverage of the product is. In other words, as the value of the underlying asset falls, leverage increases.
  • Mini Futures Short: The higher the value of the underlying asset is compared to the financing level or strike, the higher the leverage of the product is. In other words, as the value of the underlying increases, the leverage increases.

Higher leverage = higher risk

As an investor, you can choose the level of risk you want to take. In our product range, you can find products in the same underlying with several different risk levels and choose which one suits your investment plan.

Stop-Loss

An important part of Mini Futures is the stop-loss level (stop-loss barrier). If the underlying asset reaches this level, the Mini Future will automatically expire, allowing investors to be repaid any redemption amount depending on the performance of the underlying asset. In many cases, it is the difference between the stop-loss level and the strike, taking into account the ratio and possible exchange rate. In some cases, the product may expire worthless due to market conditions (market risk and liquidity risk). A total loss of the invested capital is therefore possible. The stop-loss level is usually adjusted on a monthly basis.

The product can only be knocked when the underlying market is open. For example, Brent Crude Oil Future can be knocked between 03:00 and 01:00 in local time (EET) depending on the time difference. However, some underlying assets such as Bitcoin can knock around the clock, as the underlying asset can be traded around the clock. If you are not sure whether a product has reached its stop loss level, you can always check it on our product-specific website. You can find the product by entering either the product name or the ISIN number in the search box.

Risks

This information is neither an investment advice nor an investment or investment strategy recommendation, but advertisement. The complete information on the trading products (securities) mentioned herein, in particular the structure and risks associated with an investment, are described in the base prospectus, together with any supplements, as well as the final terms. The base prospectus and final terms constitute the solely binding sales documents for the securities and are available under the product links. It is recommended that potential investors read these documents before making any investment decision. The documents and the key information document are published on the website of the issuer, Vontobel Financial Products GmbH, Bockenheimer Landstrasse 24, 60323 Frankfurt am Main, Germany, on prospectus.vontobel.com and are available from the issuer free of charge. The approval of the prospectus should not be understood as an endorsement of the securities. The securities are products that are not simple and may be difficult to understand. This information includes or relates to figures of past performance. Past performance is not a reliable indicator of future performance.


The value of the products can fall significantly below the purchase price due to changes in market factors, especially if the value of the underlying asset falls. The products are not capital-protected


Investors in the products are exposed to the risk that the Issuer or the Guarantor may not be able to meet its obligations under the products. A total loss of the invested capital is possible. The products are not subject to any deposit protection.


Due to the leverage effect, there is an increased risk of loss (risk of total loss) with leverage products, e.g. Bull & Bear Certificates, Warrants and Mini Futures.


If the product currency differs from the currency of the underlying asset, the value of a product will also depend on the exchange rate between the respective currencies. As a result, the value of a product can fluctuate significantly.


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Please read this information before continuing, as products and services contained on this website are not accessible to certain persons. Of importance are the respective prospectuses which are attainable from the issuer: Vontobel Financial Products GmbH, Bockenheimer Landstrasse 24, DE-60323 Frankfurt am Main, Germany, as well as from this website.