How futures work?

Discussion in 'Trading' started by cashmoney69, Feb 23, 2009.

  1. when a future contract hits the market for the first time, how is

    the number of contracts to be traded, determined?

    In stocks, you have an IPO where the net worth of the company is divided into shares....but how does this work in futures?

    Can a futures contract "split" like a stock can if demand is high?
  2. mr888


    its a zero sum game Pal, for every long there is a short.
  3. MTE


    Futures are contracts not securities so there's no limit to how many can exist. In fact, until a buyer and a seller meet and make a trade a contract doesn't exist (assuming both are opening a new position).
  4. 1) Stay away from futures until you understand the concept of "open interest".
    2) Contract sizes can be altered depending upon market conditions.
  5. Nazzdack is right; it's about open interest. There isn't a fixed number of contracts; they only come into existence when two parties agree on the terms (i.e. the price and settlement month). The exchange's value is in facilitating this negotiation, and tracking after the contract is made.