Because you're buying/selling a physical commodity - supply and demand effect the individual months as well as the overall product (for example winter months effect heat oil demand, or maybe you're bullish to 2007 future growth in china which requires galvanised steel which in turn effects the price of zinc so maybe you want to buy dec07 zinc rather than the typical 3 months forward price, and so on) For the average individual commodity trading is generally expensive in margin to equity requirements (nearby crude for example is $3850 per lot in initial margins alone) so I would suggest something like SG warrants for you - go to www.sgwarrants.com - these trade just like options. I think SG let you can trade a dummy account to get a feel for it also. Good luck
Bigmak, 1st, buy any 101 book on trading futures so you see how they work. Very similar to stocks actually (chart wise, but you have lots of leverage, and as stated here previously, the contracts expire). With the leverage available, you prolly won't hold a position too long anyway. In a few days you can make or lose an astounding % of your acct (hell, in one day if you max your margin). A few advantages of futures: 1) shorting is the same as buying. no rules, etc. 2)leverage. 3) better tax treatment if you actually make money. A few suggestions. Be sure to trade the mini contracts if you are trading crude. Plenty liquid, and electronic. Also, always trade the front month. The vast majority of the volume is here, and crude rolls every month, so you have to be careful. Jay
Ok, so in short, just to keep things simple. I can still do the usual long and short buying of shares, except that now they will expire at some point. If I didn't sell my shares and they went all the way to the expiry date...would I then be automatically closed out of my position at that price? So being a canadian and all, and only having an account with IB at this point, what's the best way for me to trade futures? Through a canadian brokerage, on a canadian exchange? I don't want to be charged an arm and a leg for commissions and have limited resources, which is how it is with stocks in canada...what about futures? I like the sounds of trading the minis.
Please read all relevant material prior to trading futures. As mentioned, you are trading a contract that can roll to physical delivery...so you need to know how to roll contracts, expiration dates, etc. Another thing to look out for is slippage. You may not have the best fills on CL if you are trading 1 contract. But if you are holding for a few days/weeks, this should be a minor problem. Check out a Schwager book, or the NYMEX/CME websites.
IB is great for futures, so you wouldn't necessarily need to look anywhere else. If you're going to trade crude futures, definitely stick to the nymini contracts (IB symbol=QM - current, or front, month is May). I don't think it would be on your radar anyway, but I would strongly suggest you stay away from the pit traded contract (symbol=CL). Make sure you visit NYMEX's web site so you know the trading hours, contract specifications, expiration dates, etc. Crude trading takes a break in the morning, and then ends the day earlier than the US stock markets do (it re-opens shortly thereafter). I know you're an experienced trader, but watch the action for a while before you put on a trade and make sure to put in a hard stop. The crude market is likely to be a lot more volatile than stocks you may have traded, and a trade can run away from you very quickly. Good luck. Regards,
Hello Bigmak, The mini Crude is a 'cash-settled' contract, so if you did happen to keep that position to expiration it would be offset with a proift or loss based on the settlement price vs. where you got in. Feel free to contact me by email or phone. I'll give you a competitive rate and go over some important points for new traders. I'd like a shot to try and earn your business. Once you talk to me feel free to shop around with other brokers. Hope to hear from you.
be prepared to lose money ... if you are a newbie rushing into crude futures ( yikes ) I think there are other futures that have been moving that are less volatile or have less risk good luck to you