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Basically, you buy (go Long) on a futures contract when you think the underlying asset is going to go up and you go short on a futures contract when you think the underlying asset is going to go down.
When you go long or short on a futures contract, you only need to pay a small deposit (typically about 10% of the price of the underlying asset) known as the "Initial Margin".
Winnings are added to your margin daily and losses taken from it. When your margin drops to a level known as a "Maintenance Margin" due to losses, you will receive a "Margin Call" to top up your account back to the initial margin level.
You can close off (offset) your futures position at anytime in order to cut loss or take profit.
For more details on how futures trading works, please refer to the link below.
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What are the differences between future and option contract?
There's one main difference and it's huge: An option contract gives the person who buys it the privilege of doing whatever it is the contract is written for. A futures contract imposes an obligation on the buyer. There are also liquidity requirements and requirements to pay performance bonds in futures trading that don't exist in options trading, but the real basic difference is that an options buyer can do something and a futures trader has to.
How much is one heating oil future contract in gallons?
A heating oil futures contract is 1000 US barrels, or 42,000 gallons. A semi with a oil tank holds 5,000 gallons, so one futures contract equals seven truckloads of oil.
When you choose future contract over forward contract?
When there isn't an active market for the forward contract. Generally, Futures contracts have a much more active open market than forward contracts and have alot more choice in terms of expiration months than forward contracts.
What is the meaning of variable annuities?
A Variable Annuity is an insurance contract in which at the end of the accumulation stage, the insurance company guarantees a minimum payment. The remaining income payments can vary depending on the performance of the managed portfolio.
What are the similarities between a forward contract and afutures contract?
Forwards Contract: A forward contract is the simplest of the Derivative products. It is a mutual agreement between two parties, in which the buyer agrees to buy a quantity of an asset at a specific price from the seller at a future date. The Price of the contract does not change before delivery. These type of contracts are binding, which means both the buyer and seller must stay committed to the contract. This means they are bound to deliver or take delivery of the product on which the forward contract was agreed upon. Forwards contracts are very useful in hedging Futures Contract: A futures contract is an agreement to buy or sell an asset at a certain time in the future at a specific price. The Contractual terms of the futures contracts are very clear. The Futures market was designed to solve the shortcomings in the forwards contracts. Unlike forwards, futures are traded in organized exchanges. They also use a clearing house that provides the necessary protection to both the buyer and the seller. The price of the futures contract can change prior to delivery. Hence, both participants must settle daily price changes as per the contract values. Difference: Futures are traded in Organized Exchanges while Forwards are Over-The-Counter (OTC) traded
What is the future of trade?
In Future Trading, one speculates on the price of a commodity going up or down in the future. In Future Trade, there is a contract up to a specific time what one can cancel at any time. In Future trading, one does not hold the actual commodity but the speculative investment in writing.
What is the purpose of Future Trade?
In Future Trading, one speculates on the price of a commodity going up or down in the future. In Future Trade, there is a contract up to a specific time what one can cancel at any time. In Future trading, one does not hold the actual commodity but the speculative investment in writing.
What are the trading mechanism of forward market?
if the market goes up sell spot buy in future market if market goes down buy spot sell in future market
What does currency future trading mean?
A currency future means to trade one currency for another in the future at a price that has been determined on the purchasing date. This is a future contract, not one that occurs right away.
What is cash and future trading?
Cash trading is buying an asset at its current price and holding it for capital appreciation. Futures trading is leveraged speculation on whether the price of the underlying asset will go up or down by the time the futures contract expires, typically a month or more in the future.
Which companies specialize in commodities futures trading?
Commodoties futures trading involves buying and selling contract for the future delivery of raw materials e.g oil, gas, grain. Its regulates in the US by the Commodity Future Trading Commission and the main companies operatin in this arena are Orion Futures, Cannon Trading and United Futures.
What are the requirements for trading under commodity?
The Commodity Exchange Act make it illegal to trade a contract for the purchase or sale of a commodity for future delivery a futures contract unless the contract is executed on a federally designated exchange .
What is the future of oil trading?
Unless oil become extinct, oil trading will likely continue indefinitely. An oil future is a type of investment in which someone speculates whether the price of oil will rise or fall. It is a type of future contract in which both the buyer and seller agrees in advance on the price the buyer will pay for the future oil.
How does one use an index future?
An index future is a "cash-settled futures contract on the value of a particular stock market index". Index futures are used in investments, trading, and hedging.
What are some common trends in commodity option trading?
Two common trends in commodity option trading are; 'Futures and Sell option' (buy a future contract for a certain month and sell an option contract for that same month) and 'Buy Futures and Buy Options' (buy both the future and option contracts in order to protect yourself in case one goes lower).
What are the requirements for trading under commodity exchange?
The Commodity Exchange Act make it illegal to trade a contract for the purchase or sale of a commodity for future delivery a futures contract unless the contract is executed on a federally designated exchange .
When did Future Trading Act happen?
Future Trading Act happened in 1921.
