Futures,Trading,Overview,Futur finance, share, loan Futures Trading Overview


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Futures trading or commodity trading first started in Japan and in Holland, somewhere in 18th century. In US, commodity trading started by establishing a commodity market place in 1840s century. The market offered both sport delivery and futures contracts. Futures trading differ from spot trading in different aspects. Spot trades are done for actual (and real-time) cash/product deliveries but futures are traded for hedging possible price uncertainties. Spot trades are done usually with a two-day cash delivery method where futures trades are done for usually 3 months durations. The futures trades for contracts which expire by next month or less is also often called spot trades. The first products available for futures trading include meat, grains and live stocks. Later futures contracts for a variety of products were implemented including those for energy products, metals, currencies and currency indexes, stocks and stock indexes, and private and government interest rates. The CME (Chicago Mercantile Exchange) is responsible for the introduction financial features in 1970s, which very soon became the most traded futures type. All futures have unchangeable contract specifications which are guaranteed by the clearing houses and margined to minimize counterparty credit risks. They are traded by open outcry of screen in public domain. Futures contracts are almost similar to forward contracts, and often the names are used interchangeably, but forward contracts are typically traded OTC (over-the-counter) through issuer-client or broker-dealer interactions where futures are traded through centralized markets. Commodity futures are the most common form of futures and are traded all over the world. With the passing of time new and new agricultural, livestock and metal/natural commodities are becoming available for futures trading. Futures options are, like stock options, the right to buy or sell futures contact on a certain price at a specific time. A call futures option is the right to buy a futures contract and put futures option is the right to sell a futures contract. Stock features or single-stock features are futures contracts for owning an underlying stock. Stock features usually have greater leverage and the holders of futures do not receive/pay any dividends. Stock index futures are meant for multiple purposes like hedging, trading and investing. Hedgers for owning stocks or index options, traders for benefiting form price volatility, and investors for achieving certain goals by not directly owning the stock. Currency features are futures contracts that enable the holder to buy or sell a currency at specified rate at a future date. As these futures are marked-to-market daily, the forex investors can easily overcome the obligation to sell or buy currencies before the delivery date. In US, the futures trading are regulated by CFTC (Commodity Futures Trading Commission). The major worldwide futures trading markets are CBOT (Chicago Board of Trade), CME, ICE Futures, Euronext.liffe, London Commodity Exchange, Intrade, London Metal Exchange, TOCOM (Tokyo Commodity Exchange), NYMEX (New York Mercantile Exchange), NYBOT (New York Board of Trade), Sydney Futures Exchange, etc. Article Tags: Futures Trading, Futures Contracts, Spot Trades

Futures,Trading,Overview,Futur

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