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What is the Capital gains tax for profit from futures and options trading?
Wiki User
∙ 16y ago
It is the same as taxes on ordinary income unless the basis and holding period qualify for treatment as long-term capital gains. Some state income taxes do no differentiate, and so it is all ordinary income.
Wiki User
∙ 16y ago
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Who profits from futures trading?
The main people that profit from futures trading are the hedgers and speculators. The hedgers are the producer of the commodity who trades a futures contract to protect himself from changes in prices in the future for his product. A speculator is the independent floor traders and private investors that buy the contract and sell it for higher price.
Need of future trading?
Futures contracts were designed as hedging tools for commodities trading where the buyer and seller can secure a fixed trading price in the future in order to hedge against price fluctuations. Today, futures trading is used for both leverage and hedging. Futures trading enables you to trade directional leverage as much as ten times. This means that by buying futures instead of the stock or commodity, you could make ten times the profit on the same move. However, leverage cuts both ways. You could lose up to ten times as much as well. For more about futures trading, refer to the link below.
How do they determine trading calls?
Call options allow you profit when the price of the underlying stock goes up. So you would buy call options when you wish to profit upwards and sell call options when you wish to profit sideways or downwards.
What kind of trading is FBR associated with?
FBR Capital Markets is associated with equity sales and trading. They are furthermore associated with the trading of mutual funds, hedge funds and pension and profit-sharing plans.
What are the features of Commodity Future Option Trading?
All futures are bought and sold on margin. Profit and loses are magnified. The risk of leverage puts you at a risk of losing substantially more than you put in.
How do you invest in call and put options to make good return?
The easiest way to profit from options is to buy call options when you think the underlying stock is going to go up and buy put options when you think the underlying stock is going to go down. However, that is only the most basic way of trading options. There are literally hundreds of different combinations known as "Options Strategies" that you can use to make very good profit in options trading. In fact, using some of these options strategies, you could even profit no matter if the stock goes up, down or sideways! No prediction needed. Check out the list of options strategies in the recommended link below.
What is proprietary trading?
Proprietary trading is a term used in investment banking to describe when a bank trades stocks, bonds, options, commodities, or other items with its own money as opposed to its customers' money, so as to make a profit for itself. Although investment banks are usually defined as businesses which assist other business in raising money in the capital markets (by selling stocks or bonds), in fact most of the largest investment banks make the majority of their profit from trading activities.
Options and futures are zero sum game?
Each futures or options contract requires two counterparties to the trade: long and short. In other words, for futures contracts to materialise, there needs to be one buyer matched with one seller at a specific point in time, dealing in certain asset, at a certain delivery point. For options, a writer has to sell their contract onto a holder, who purchases the option. Again, the deliverable is specified and strike price established. Futures and options contracts are dealt daily on exchanges, such as CME or Euronext. These exchanges provide rules for trading the derivatives, such as options and futures. Moreover, these exchanges act as central counterparty to the trade between buyer and seller, long and short in futures or writers and holders for options. Futures contracts are marked-to-market daily, so that profit and loss on each position is calculated and added or removed from the trader's account. Therefore, one point gain on long position will equal one point loss on equivalent short position. The short pays long the daily difference in contract price changes via central counterparty. Reverse applies when prices go down, then short gains money and long loses it, but the difference will always be zero. So zero-sum game is: +1 gain on long equals -1 loss short which = 0
What are the advantages of buying commodities?
Trading commodities is much like trading stock, in that you can sell the contract whenever you feel you will make a profit. Another advantage is the possibility to trade commodities without upfront capital.
Why investors need to trade in commodity futures trading?
The advantages of futures trading, according to "Online Futures Trading - Advantages and Disadvantage" by Tim Wreford: Leverage. Futures operate on margin, meaning that to take a position only a fraction of the total value needs to be available in cash in the trading account. Commission Costs. Electronically traded futures contracts require no human intervention to match buys and sells unlike a traditional futures pit. This means that commission costs can be cut dramatically, leading to significant savings for the frequent trader. Liquidity. The involvement of speculators means that futures contracts are reasonably liquid. However, how liquid depends on the actual contract being traded. Electronically traded contracts, such as the e-mini's tend to be the most liquid whereas the pit traded commodities like corn, orange juice etc are not so readily available to the retail trader and are more expensive to trade in terms of commission and spread. Ability to go short. Futures contracts can be sold as easily as they are bought enabling a trader to profit from falling markets as well as rising ones. There is no 'uptick rule' for example like there is with stocks. No 'Time Decay'. Options suffer from time decay because the closer they come to expiry the less time there is for the option to come into the money. Futures contracts do not suffer from this as they are not anticipating a particular strike price at expiry. Automated trading. Electronic futures brokers offer the facility to programmers to interface directly with their trading software. This means that custom written trading software can automatically trade a strategy without any human intervention at all. A system can make buy/sell signals which are automatically routed to the exchange along with any stops and targets. Almost instant fills. With electronically traded futures there is no need to call up a broker and wait for a fill from the trading floor. Orders are instantly placed on the electronic order book and filled as soon as a match is found - for liquid contracts such as the emini S&P500 this will be within a second. Level playing field. With traditional pit traded futures the professional in the pit has a major advantage over the retail trader in terms of speed of execution and costs. Electronic futures trading offers all participants exactly the same advantages.
Why net profit added in capital?
Net profit of current fiscal year added in capital because it is part of owners capital because owners have invested capital to earn profit.
How to profit from day trading?
There is a few ways you can profit in today's trading. You will have to start with finding things cheap and selling for double.
