Summary Futures contracts are the first of the leveraged products that we are looking at in depth. They can be extremely powerful, although that power also translates as risk if you do not take sensible precautions. If you need to increase your profit potential, and are prepared to take the necessary steps to preserve your […]

Spreads Spreads are strategies that involve buying one contract and selling another. You’ll come across them again in the next module, on options, but with futures they’re a little different from those. The term spreads comes from the price difference between the two contracts, and the object of spreads as a strategy is that the […]

Long Futures So the most basic strategy with futures is to find a stock you think is moving higher, and buy a futures contract rather than the stock itself. This immediately multiplies up the impact of your funds. You can apply the same idea to buying a futures contract in an index, when you think […]

Futures Strategies I’ve covered a lot of ground in explaining how futures work and are traded. There are many other factors to do with futures, such as the size of each contract and the specifications, and these are spelled out on the websites that give you information on specific futures contracts. You need to be […]

Pricing Futures When a futures contract is created, with a buyer and seller, the price of it is the amount that both sides think they should pay, in other words the pricing is neutral. It has to be by definition, otherwise one of the parties would be unwilling to enter into the contract and there […]

Other Futures So far we’ve considered only the traditional futures markets, which have their origin in the 19th century. But as I mentioned at the beginning futures contracts are now available on many different underlying things, so we need to go through the variety that is available. Bond Futures A bond is a loan which […]

Commodity Pointers There are a number of pointers you should be aware of if you are spread betting on the traditional commodities. With ‘soft’ commodities, which are growing goods such as sugar, you should always look for an annual cycle in the prices. In the case of sugar, there are actually two crops because sugar […]

Market Example Just to give you a taste of the markets, here are some screenshots from the CME Group website, www.cmegroup.com. These are for Lean Hogs. First here’s the specification sheet which tells you what the contract covers. You can see that it defines the amount, the price limits referred to above, and the contract […]

Trading Futures To start trading futures, you have to provide a deposit which is known as a margin. This provides collateral to the exchange against the possibility that you don’t meet the contract. Given the size of standard futures contracts, as you will see the next section, there is a lot of money at stake […]

Module 14 – Futures Introduction In the last few decades, futures contracts have grown from being solely for commodities to encompassing virtually any financial instrument you can think of. They started with futures contracts on currencies and treasury bonds, and then included futures on indices, and most recently single stock futures have become available. In […]