How to Invest in futures - What you need to know

Discussion in 'Commodity Futures' started by pitbase, Jun 28, 2022.

  1. pitbase

    pitbase

    Some basic information for the Newbies.



    Basics – What is a futures market?
    In the futures market, futures contracts are mostly bought and sold either for hedging or speculation to make profit. One party agrees to buy a given quantity of securities or a commodity, and take delivery on a certain date. The seller agrees to provide or deliver the commodity at the specified date.

    Futures and options are traded through exchanges and firms or brokers registered with the Commodities Futures Trading Commission.

    Basics of Futures Trading
    Most futures traders are speculators who buy or sell futures contracts or options on futures with the goal of making profits. Most futures contracts are traded in centralized exchanges like the Chicago Mercantile Exchange and the Chicago Board of Trade, through a broker like PitBase.

    Commodity futures markets include currencies, energies, financials, grains, stock indexes, indices, meats metals & softs.

    Contract Specifications
    There are key elements a trader needs to know before trading futures. The tick size, contract size and contract value. They help traders determine the monetary value of their position, while managing risks

    Tick Size:

    Tick size refers to the smallest amount that the price of a futures contract can change or fluctuate.

    Let’s use the E-mini S&P 500 as an example. One point of the S&P 500 index equals $50. The E-mini S&P 500 has a tick size equal to 0.25 of an index point. So a tick size of the E-mini S&P 500 equals 0.25 X $50 = $12.50. So every tick move of the E-Mini S&P 500 is worth $12.50.

    For tick values of other commodities, check out the contract specifications on PitBase website.

    Contract Size:
    Contract size refers to the deliverable quantity of the underlying asset of the futures contracts. The contract side of the E-Mini S&P 500 is $50 X the index value.

    For contract sizes of other commodities, check out the contract specifications on PitBase website.

    Contract Value:
    Value of a contract can be calculated by multiplying the contract size by the current price.

    Value of 1 contract of the E-mini S&P 500 is $50 x S&P 500 Index. If the underlying index is trading at $3,500, the contract value equals $175,000 ($50 x $3,500)

    How to trade futures
    Getting started is relatively easy. Open an account with a futures broker like PitBase. The process will involve asking and verifying information about who you are.

    The broker will also ask about your income, net worth and experience with trading futures. These questions are required to meet compliance with Governing regulatory organizations and determine the amount of risks the broker will allow a trader to take on. This includes the margin and risk exposure.

    Brokers charge commissions and fees as you trade with them. Brokers provide varying services and tools that influence your trading experience.

    Some brokers like PitBase will allow you to open a Simulated Practice Account. You can practice trading with “paper money” before you commit real money to trading. A Simulated account helps you gain a better understanding of how the markets work.

    You also get a better understanding of how to calculate and use tick size, contract size and contract value. A simulated account also helps understand the use of leverage and how commissions affect your account value.

    If you are new to futures trading, a Demo or Simulated trading account is a great way to get comfortable with trading futures while developing, improving and getting comfortable with strategies.

    Always remember there is a risk of loss in futures trading. Futures trading is not for everyone.

    Past performances is not indicative of future results.
     
  2. Basics – What is a futures market?
    In the futures market, futures contracts are mostly bought and sold either for hedging or speculation to make profit. One party agrees to buy a given quantity of securities or a commodity, and take delivery on a certain date. The seller agrees to provide or deliver the commodity at the specified date.

    Past performances is not indicative of future results.[/QUOTE


    Thanks but pretty old and pretty basic
     
  3. Good article. I have got which I was looking for few days.
     
  4. maxinger

    maxinger

    How to Invest in futures
    --->
    How to trade futures
     
  5. pitbase

    pitbase

  6. Handle123

    Handle123

    LOL, a product that has contract months is not an investment.
     
    Nobert and mason macgregorson like this.
  7. MrMuppet

    MrMuppet

    "investing" and "futures" are two words that I wouldn't have thought to ever see in one sentence
     
    mason macgregorson and maxinger like this.
  8. maxinger

    maxinger

    There are people in this forum who actually

    invest in forex.
     
    MrMuppet likes this.
  9. Nobert

    Nobert

    Even the ones of a year long ;
    like where on YT influencers brought adds about investing into Oil (USO i think) & the ETF is made out of futures plus 10% of it or so was 10 y treasury bonds.