Stock index futures are based on the benchmark indexes such as:Ī stock futures trader is essentially trading on the overall market direction. When traders start to learn about trading futures, they are initially exposed to commodity futures but stock futures are a popular instrument to trade as well. Some products are open close to 24 hours a day Monday to Friday but some have shorter sessions.Īll products have at the very least a small maintenance shutdown period and so you should know this to ensure you don’t get stuck in a position. You’ll also need to make a note of the product’s trading hours which along with tick size and value, can be found on their respective exchange’s website. The futures contract, unlike stocks, have a shelf life which means they can expire. The value is derived from the instrument(s) that are being traded such as crude oil or the S&P. The futures contract has no real value by itself. Terms of settlement (speculators never take delivery).But in order to avoid delivery, it is imperative that you make sure you know what the schedule is and when the trading activity for your market moves into the next expiry month (contract roll).Ī futures contract will contain information such as: Some have a new contract every month, some have a new contract every quarter and some have slightly more unusual schedules. When the price changes, you either make or lose money just like any other trading vehicle.ĭifferent futures products also have a different expiration schedule. The minimum price change is called a “tick”.Ī tick may be 0.0001, 0.01, 0.25, 0.5, 1, 2 or anything else for that matter – and the value it represents also varies depending on the product. From crude oil to the S&P 500 stock index and pork bellies to frozen orange juice, these products have different trading profiles and because of this the futures contracts on them also have different specifications. There are many different types of market that futures contracts are traded on. You should always know the futures expiration dates of any market you trade. They’ll always make sure that before expiration, all of the contracts that they’ve bought and sold for the specific expiry month they’ve been trading, add up to net zero. Those who day trade futures never get involved in the actual delivery though. However, for the majority of products trading activity is prohibitively low (lower volume) in all but the nearest or “front month” expiration (prior to contract roll just before expiration).ĭepending on the specific instrument, futures contracts can be settled by delivery of the underlying product or in other cases they can be cash settled. When you are trading futures, be assured that futures exchanges are a highly regulated environment which ensures market participants are protected from issues such as fraud and other negative practices. Commodity Futures Trading Commission which is an independent government agency. Financial instruments are also available such as US 30 Year T-Bond Futuresįirst thing to note is that the Futures markets are regulated by the U.S.Commodity futures contracts include such things as crude oil futures, orange juice, natural gas, gold.The S&P, Nasdaq, Dow, Russell which are stock market futures.Individual traders, in particular, are well served trading futures with the E-Mini contracts. Futures Trading is the buying or selling of futures contracts that are agreements to deliver (or take delivery of) an underlying product at a certain delivery date and therefore, these contracts expire.įutures contracts cover instruments such as:
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