Futures Trading Guide – Everything You Need to Know
Similar to the Options trading, Futures trading also deals with the trading of contracts or bonds. Its contract, which is known as the “Futures contract,” is an agreement between the seller and the purchaser regarding a specific product at a definite amount and time. This agreement however, is determined by the trading market.
Future trading guides are particular about the Futures price. As this type of trading is done in popular futures exchanges, the futures price greatly settles based on the law of supply and demand. This scenario happens between the buying and the selling of the bond, when the trends are drawn based on this economic law.
In this type of trading, the buyers and the sellers anticipate high prices in the future. Largely, the cost of the contract remains in effect during this market situation. Fluctuations of the value cause the bonds to go low. Thus, transactions in this type of market are largely reliant on the profit margin than those commodities involved.
Terminologies in the Futures trading guide are also pertinent to the investor’s venture. These terms involve essential methodologies, that should be understood by futures traders most especially the novice ones. Thus, in this Futures trading guide, these terms will be discussed thoroughly.
One of the key terms that a Futures trader should know is the “settlement price.” The “settlement price” is the official final price in the futures contract or agreement at the closing stage of the trading session. This price remains fixed for a specific date, as dictated by the trade in the Futures market.
The “settlement date” or the “delivery date” on the other hand, is the date of Futures deliverance. This very date is relevant to the bond’s deliverance.
Owners of the Futures bond are under obligation of obtaining and delivering bonds in accordance to the rules of the contract. This is then the obvious dissimilarity of the Futures trader from the Options trader for Options buyers have rights to their assets but they do not have any obligation at all. Options traders have the choice whether they are going to execute a contract or not. In the Futures trade however, the buyers and the sellers are under no force in settling contracts during the delivery date. The sellers give the assets to the purchasers upon finishing a deal. If the money has been settled in the Futures bond, loss-incurring positions are shifted to profit making.
These insights are just a few of the pertinent information in the Futures trading. There are a lot of information that needs to be discussed and studied before one can ensure success in the Futures trading. This Futures trading guide is just a piece of the pie that a Futures trader should eat before getting involved in bigger deals in the Futures trading market. There are many terminologies, strategies and methodologies that should be remembered to ensure great profits after every transaction. It is important that you would master them to avoid risks of financial loss.
Author: Jeff C Daniels
Article Source: EzineArticles.com
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The Significance of Future Trading
Future trading channels are very particular about the future price rates. Since this trading is done in famous futures exchanges, the price for future largely settles on the basis of demand and supply law. This situation happens between the trading of bond and contract, where the trends are made based on this fiscal law. In the future trading, the sellers as well as the buyers predict higher prices in future. For the most part, the cost of contract stays in effect throughout the whole market situation. Fluctuations in the value may cause lowering down of the bonds. Therefore, trading in this market is largely dependent on the profit margins than the cost of merchandise.
Futures trading terminologies are also important for the investor’s undertaking in this market. These terms includes essential methodologies, which should be clearly understood, especially by the novice futures traders.
“Settlement price” is one of the main term that is commonly used in the future trading. The “settlement price” is the final price established in the future agreement or future contract at the closing session of trading. This price is set for a specified date as ordered in the Futures market and remains unchangeable. On the other hand, the “delivery date” or the “settlement date” is the date of Futures deliverance of the bond.
Owners of the Futures contract are under the compulsion to obtain and deliver bonds as per the contract rules. This is completely different from the option trade, where the options buyers possess absolute rights to their assets and do not have any to undergo any type of obligation.
In the Futures trading, the buyers and the sellers are under no obligation to settle the contracts within the specified delivery date. On the completion of a deal, the sellers provide the assets to the purchasers. If money is settled in the Futures contract, then the loss incurring situations are changed to profit making.
The above mentioned features are just a small insight to the Futures trading. There is a plenty of information which needs to be studied and discussed before you can actually venture the future trading and become successful. There are many things that need to be considered before getting involved in the future trading market. You must be well aware of the terminologies, methodologies and strategies related with future trading to ensure higher profits in every deal. It is essential to master them well in advance to avoid any financial losses in future.
Author: Michael Antony
Article Source: EzineArticles.com
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What Are Futures?
In the world of finance, there are many uncommon and niche terms used, which are alien to the rest of the world. ‘Futures’ is one of those terms that is used to identify a form of a financial contract. Futures Contract is a standard contract, to buy or sell a certain asset at a certain date in the future, at a specific time. Usually futures contracts are traded on a futures exchange.
The futures contract detail the quality, quantity and the price of the underlying asset. Usually there are many motives for making a futures contract. Since it is a business agreed to be performed in the future at a specific time and for a specific price, the buyer of the underlying asset is protected against the price fluctuations of the asset in the market. This may result in profit or sometimes, a loss to the contract holder as there is an obligation to buy or sell at the specified price.
Many contracts in the financial world assign the ‘right’ to do something to the contract holder. Futures contracts differ in this aspect by assigning ‘right’ and ‘obligation’ to the contract holders (both parties) for performing what the futures contract details. Some futures contracts call for a physical delivery of the asset and others are settled in cash.
Many assets, especially commodities are subjected to futures contracts in futures exchanges. As an example, there is seller who would like to sell a high volume of corn at the next harvest. Although, the corn is not produced yet, the producer wants to make sure that a proper price is paid for the corn in the future. Then there is a buyer who is looking for corn from the next crop, who will be willing to pay the current market price for it or something similar. In this case, the seller and the buyer can form a futures contract on a specific price, through which both the seller and the buyer are protected against the high price changes.
There are two main traders of futures; hedgers and speculators. Hedgers are interested in the asset subjected to the futures contract and they seek to hedge out the risk of price changes. Speculators usually have no interest or practical use of the assets subjected to the futures contract. They usually buy futures for selling them later with profit to interested parties.
Futures and ‘Forwards’ looks the same in the finance market but they have two significant differences. Firstly, Futures are traded in Futures exchanges, but forwards are traded over the-counter. Secondly, Futures have a less credit risk while forwards carry a high risk.
Author: Zoran Maksimovic
Article Source: EzineArticles.com
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Futures Exchanges – Knowing Where To Do Business
Good for you! You’ve been reading, you’ve put together a trading rules to lay the foundation for your futures trading plan and you’ve even been paper trading to prove your trading plan. Now you are ready to learn more about where you will be doing your business; it’s time to talk about the futures exchanges.
General Futures Exchange Information
As you know at this point, you will not actually do business with the futures exchanges listed below. You will work with your broker who will take your futures orders to the exchange floor for you. Since you have been paper trading, you probably have already established an account for commodities trading so we won’t go over that again. While there are futures exchanges throughout the world, we will focus on the ones in the US. The markets we will outline are in Minneapolis, Kansas City, New York and Chicago.
History of Futures Exchanges in the US
The modern futures trading began in Chicago, IL in the early 1800s. Chicago, with its location at the base of the Great Lakes, is close to the farm of the U.S. Midwest which made it a natural center for transportation, distribution and trading of agricultural produce. Gluts and shortages of these products caused extreme changes in price. An exchange was needed that would bring together a market to find potential buyers and sellers of a commodity instead of making people bear the burden of finding a buyer or seller. In 1848, the Chicago Board of Trade (CBOT), the world’s first futures market, or futures exchange, was formed. Trading was originally in futures and the first contract was written on March 13, 1851.
Futures Exchanges
Different futures exchanges trade different commodities. In addition, each future exchange accepts different futures orders. Since not every exchange allows every order it is necessary to talk with you broker about which orders are permitted in the markets you trade. The following is a list of the major commodity exchanges, their commodities, and the orders that they accept:
Chicago Board of Trade
Location: Chicago, IL
Commodities
o Corn
o Oats
o Soybeans
o Soybean Oil
o Soybean Meal
o T-Bonds
o T-Notes
o Muni Bonds
o 5 Year Notes
o 2 Year Notes
o DJIA Index
Acceptable orders: Market, Market on Close, Limit, Stop, and Fill or Kill Orders
Chicago Mercantile Exchange
Location: Chicago, IL
Commodities
o Live Cattle
o Lean Hogs
o Lumber
o Feeder Cattle
o Pork Bellies
Acceptable orders: All futures orders are acceptable.
Index and Option Market
Commodities
o S&P 500
o Mid-cap 400
o NASDAQ 100
Acceptable orders: All futures orders are acceptable.
International Monetary Exchange
Location: Chicago, IL
Commodities
o T-Bills
o Euro Dollars
o Canadian Dollar
o Euro Currency
o Australian Dollar
o Mexican Peso
o Euro Yen
o Japanese Yen
o British Pound
o Swiss Franc
Acceptable orders: All futures orders are acceptable.
New York Comex
Location: New York, NY
Commodities
o Copper
Acceptable orders: For Copper only, acceptable are Market, Market on Close, Limit, Stop, and Fill or Kill.
Commodities
o Gold
o Silver
Acceptable orders: For Gold and Silver, acceptable are Market, Market on Close, Limit, Stop, and Fill or Kill. Stop Limits are acceptable only on a not-held basis.
New York Cotton Exchange
Location: New York, NY
Commodities
o Cotton
o Orange Juice
o Dollar Index
Acceptable orders: Market, Market on Close, Limit, Stop, and Fill or Kill.
New York Coffee, Sugar & Cocoa Exchange
Location: New York, NY
Commodities
o Coffee
o Sugar
o Cocoa
Acceptable orders: All futures orders are acceptable.
New York Mercantile Exchange
Location: New York, NY
Commodities
o Unleaded Gasoline
o Platinum
o Palladium
o Heating Oil
o Crude Oil Natural Gas
Acceptable orders: All futures orders are acceptable.
New York Futures Exchange
Location: New York, NY
Commodities
o New York Stock Exchange Index
o CRB Index
Acceptable orders: All futures orders are acceptable.
Kansas City Board of Trade
Location: Kansas City, MO
Commodities
o Kansas City Value Line
o Kansas City Mini Value Line
Acceptable orders: All futures orders are acceptable.
o Kansas City Wheat
Acceptable orders: Market, Market on Close, Limit, Stop and Fill or Kill.
Minneapolis Board of Trade
Location: Minneapolis, MN
Commodities
o Minneapolis Wheat
o Minneapolis White Wheat
Acceptable orders: All futures orders are acceptable.
Author: Stephen Bigalow
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Futures Exchanges – A Wealth Of Opportunities
Futures trading has the potential to be both exciting and profitable. The key to success is learning the details involved. A basis for understanding futures is to knowing the futures exchanges or places where futures are traded. The futures exchanges are located in various locations throughout the country; they have different commodities trading options at each location and the rules vary as well.
General Futures Exchange Information
As you may know, you will not actually do business with the futures exchanges listed below. You will place trades with your broker who will take your orders to the futures exchange floor for you. If you have been paper trading options or futures, you likely already have an account for commodities trading so you are ready to start. If not, you should select a broker and even consider paper trading for a while. Paper trading is the act of creating a fictitious account that trades just like a real one; this is an excellent way to learn about commodity trading. There are futures exchanges throughout the world but lets focus on the ones in the US. The futures exchanges below are in Minneapolis, Kansas City, New York and Chicago.
Futures Exchanges
Like the stock market, different futures exchanges trade different commodities. In addition, each futures exchange accepts different market orders. Since not every futures exchange permits every type of order it is necessary to talk with your broker about which orders are permitted where you are trading. The following is a list of the major futures exchanges, their commodities, and the orders that they accept:
Kansas City Board of Trade
The Kansas City Board of Trade is located in Kansas City, MO. This market accepts the following commodities: Kansas City Value Line and Kansas City Mini Value Line. The Mercantile accepts all types of futures orders. In addition, the Board of Trade accepts Kansas City Wheat with market, market on close, limit, stop and fill or kill trades.
Minneapolis Board of Trade
Located in Minneapolis, MN, the Minneapolis Board of Trade accepts the following commodities: Minneapolis Wheat and Minneapolis White Wheat. All futures orders are acceptable at this exchange.
Chicago Board of Trade
Located in Chicago, IL, the Chicago Board of Trade deals with these commodities: wheat, corn futures, oats, soybeans, soybean oil, soybean meal, T-Bonds, T-Notes, municipal bonds, 5-year Notes, 2-year Notes and DJIA Index. Acceptable orders here are: market, market on close, limit, stop, and fill or kill orders.
Chicago Mercantile Exchange
Also located Chicago, IL, the Chicago Mercantile Exchange trades live cattle, lean hogs, lumber, feeder cattle and pork bellies. The Mercantile accepts all types of futures orders.
International Monetary Exchange
Located in Chicago, IL, the Monetary Exchange trades T-Bills as well as trading FOREX; Euro dollars, Canadian dollars, Euro currency, Australian dollars, Mexican pesos, Euro yen, Japanese yen, British pounds and Swiss francs. The Monetary Exchanges accepts all futures orders.
New York Comex
Located in New York, NY, Comex accepts market, market on close, limit, stop and fill or kill orders for copper trading. In addition, Comex accepts market, market on close, limit, stop and fill or kill orders for gold and silver trading. Stop limits are only allowed on a not-held basis.
New York Cotton Exchange
Located in New York, NY, the New York Cotton Exchange trades cotton, orange juice, dollar index. The Exchange accepts market, market on close, limit, stop and fill or kill orders.
New York Coffee, Sugar & Cocoa Exchange
This market is located in New York, NY and trades coffee, sugar and cocoa. All types of futures and options contracts are accepted here.
New York Mercantile Exchange
The New York Mercantile Exchange is located in New York, NY. This market accepts the following commodities: unleaded gasoline, platinum, palladium, heating oil, crude oil futures and natural gas. The Mercantile accepts all types of futures orders.
New York Futures Exchange
The New York Mercantile Exchange is located in New York, NY. This futures market accepts the following commodities: New York Stock Exchange Index and the CRB Index. The Mercantile accepts all types of futures orders.
Conclusion
For those wanting to become involved in futures trading, there is a wealth of opportunities. Whether you want to start trading FOREX or coffee futures, you can find the correct futures market to do your business. It is wise to discuss your investment philosophy with your broker first and then use your knowledge, your trading plan and a system like Japanese Candlesticks to help you be successful when you head for the futures exchanges.
Author: Stephen Bigalow
Article Source: EzineArticles.com
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