Buying futures in the stock market quotes
The futures market is often seen as a casino, a legal betting parlor for speculators of the kind portrayed in the movie "Trading Places. Futures are speculative, leveraged instruments and aggressive traders can lose big, but these derivatives also can be prudent ways to diversify portfolios and hedge against losses in volatile markets. Commodities, stocks, Treasury bonds, global currencies — even the weather — are among the many types of investments tied to futures.
Buying and selling takes a high level of sophistication, and that's why futures are mostly a tool for institutions, hedge funds, trading firms and wealthy investors. At the same time, opportunities for mainstream investors to tap the futures market are more present than ever.
Now anyone with a brokerage account can climb into virtual trading pits or invest in mutual funds and exchange-traded funds that use futures strategies. In addition, more financial advisers are employing futures to give clients exposure to alternative assets with differing characteristics from stocks and bonds. Futures are "the fastest growing financial investment sector in the world," said James Mound, head analyst for Moundreport.
Futures are a way to profit from securities' short-term price movements and trends, both up and down, without actually owning the underlying asset.
A futures contract gives you the right to buy a certain commodity or financial instrument at a later date, and you agree to keep that promise. The main advantage of a futures contract is that you don't have to lay out as much money as you would to own the physical asset. To trade futures responsibly, you must understand leverage and its potential to boost or bust your investment.
Futures contract - Wikipedia
Clear and concise explanations of futures contracts' risks and rewards can be found at the Web sites of two agencies that oversee futures trading: Commodity Futures Trading Commission, at www.
You'll also learn about margin — money you must keep in the account to cover losses. Margin requirements fluctuate, and if a trade goes against you a broker may require you to pony up more cash in what's known as a "margin call.
These two governing bodies can also assist in the search for a registered trading buying futures in the stock market quotes with experience and a clean record. Enter the firm name, or broker's name, to see the entire licensing history, red flags, problems and complaints. Once you've vetted a firm, you'll need to ask some hard questions before opening an account, says Nell Sloane, owner of Capital Trading Group.
Get details about the firm's forex secrets timothy lucarelli structure and any benefits for being a client, along with how much money you'll need to make meaningful trades, Sloane adds.
And if you're not prepared to trade on your own, consider specialized mutual funds and ETFs.
Futures Market Overview: Futures Charts and Prices
Rydex Managed Futures Fund, RYMFX, For pure commodities-index exposure, check a que hora abre el mercado forex en londres iPath Dow Jones-AIG Commodity Index DJP, Telephone and email pitches; newsletters and brokers that promise guaranteed gains or secure portfolio protection; acquaintances who boast about overnight riches.
Don't be tempted by these danger signs. Run; don't walk, if a futures trading strategy sounds too good to be true. Such a relatively small amount may be throwing good money after bad. Many experts recommend much more to build positions, and firms with lax requirements might not be the most professional outfit or deliver the highest-quality research. Start on the right foot: Futures markets that are more actively traded enjoy greater liquidity, allowing you to buy and sell quickly and often at a better price.
Check the trading volume and open interest — the number of open positions — in the markets as well as the contract month you are trading. Futures markets impose limit moves to prevent one-day collapses and to contain volatility. If prices have gained or lost the daily buying futures in the stock market quotes, contract activity is essentially frozen, a situation known as a "lock limit" market.
It's part of the risk of futures trading that at times in whipsawed markets you won't be able to get into or out of a position. These include cocoa, coffee, sugar, palladium and platinum. And while markets such as crude oil may be fairly liquid, they experience "some of the most extreme market moves on weather and geopolitical events," he added.
Instead of trying to figure out which futures market is more or less risky, use a large basket of markets together as a portfolio of trading instruments to get better "overall diversification," said Zachary Oxman, a registered commodities broker at Wisdom Financial Inc. Myra Saefong is a MarketWatch reporter based in San Francisco.
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