Questions concerning FX Futures

Discussion in 'Forex' started by LouDogg, Oct 19, 2005.

  1. LouDogg


    Hello everybody. I want to make the move to FX Futures and out of the Spot Forex world. The situation with Refco was the final straw. Before I do this though, I still have some questions about how it works exactly. I understand the basics, when you buy a future, you are buying a contract for delivery of said item. It is the details that have me confused. So if any you more knowledgeable traders can answer my questions, I would greatly appreciate it.

    1. What is the Bid/Ask and how does it relate to the price you pay? Is the Bid/Ask just the spread?

    2. How can Futures be cheaper than spot if you have to pay the spread and commision? Is it just that the spreads are much tighter?

    3. What is the diference between the CME and Globex? If you buy a contract in one, can you sell it in another?

    4. I understand there is a time cost involved with Futures. Can this be explained?

    5 . What happens when the contract expires? Does it roll over into a new contract or does it just end like the way options do?

    6. Can somebody explain to me the exact process involved in trading a future?

    Thanks in advance for your answers.
  2. hi lou you can
    go to the websites of the futures exchanges

    such as

    to find some of your answers

    someone on ET once posted a "live" FX spot and futures page as well that would show you how they move in tandem.
  3. Bid/Ask is very basic cocept in general trading world. I think you should start to learn by some websites.
    This gonna be very long explanation if some starts from this level.
    One thing I can tell you is that with FX shop, you always had to make an Market Order. Good Luck.
  4. Steve_IB

    Steve_IB Interactive Brokers

  5. 7. Generally speaking, how does Futures leverage compare with Spot FX leverage?
  6. kinda same. depends on brokers, depends on intraday or overnight.
  7. Longer-term, so overnight.

    Brokers like Oanda, FXCM, Gaincapital have an effective leverage of between 100:1 to 200:1. What to most futures brokers offer? But it doesn't really matter because you'd have to be nucking futs to leverage up 200 times for a longer term trade.

    For instance, for EuroFX,

    Euro FX (EC)
    * Spec $2,835 $2,100

    That's a CME's requirement.

    1 contract of EC = 125000, so 125000/2835 =44.09...

    This is the default. x44

    Some broker needs 100% of the exchange figure for overnight, so it's x44.

    GLOBEX EUR 6E 2835 < 100%

    VelocityFutures can be 50%, so it can be x88, not sure, check by yourself.
  9. Deptrai


    1. The Bid/Ask is the spread. The ask is the price that you buy at and the bid is the price that you sell at just as in spot.

    2. Some argue that the spread is tighter, however I find them to be about the same. You have to keep in mind that the quote for USDCHF, USDJPY, and others will be inverted.

    3. The CME is a physical exchange that operates during normal hours, while Globex is an electronic exchange that operates after hours. Yes, you can open a position in the CME and close it in Globex and vice versa.

    4. The closer the contract gets to it expiration date the more the bid/ask on the futures market equals the spot market.

    5. You can either do a rollover, which will cost you commission, or your broker will close out your position on the expiration date.

    6. You place an order with your broker. They then send it to the floor of the CME. Then their trader will execute the order for you. If it is placed on Globex, then your broker will enter it into the Globex system.

    7. Leverage will be anywhere from 30:1 to 50:1. If you are carrying your position overnight, then margin is doubled. Check with your broker on what the margin is on an overnight trade.

    Note: I traded currency futures back in 1998, however I figure that not much has changed since then.
  10. If the spread is roughly the same as you say, then adding commisions, the total cost will be higher for futures?
    #10     Oct 19, 2005