Who Is A Commodity Trading Advisor (CTA)?

Futures are forward contracts on a specific good. Futures contracts on commodities are called commodity futures, those on stocks, bonds, indices and currencies are called financial futures. Depending on whether they are designed as short or long positions, they oblige the purchaser of the contract to a certain quantity and quality of the underlying asset deliver or buy at a specified future date at a price fixed at the time of the transaction.

The seller of the contract is subject to the same obligations as a mirror image. The parties can only evade these obligations by reselling the contract. This is called closing out the position. Futures are usually bought on margin. This means that the buyer does not pay the full value of the contract, but only pays a deposit known as margin. This security deposit is variable. If the margin, i.e. the ratio of the security deposit to the contract value, increases during the term of the contract, the buyer usually receives an interest credit. If the margin falls, the broker can usually request margin payments or close out the position.

Futures are standardized contracts that, like options, are entered into between two parties at a fixed price and expiry date. They are contracts for the delivery of an underlying product at an agreed time in the future (future) at an agreed price, hence the name. Futures are a type of derivative because the underlying product itself is not owned by the investor. Rather, the future derives its value from the price of an underlying asset. This could be a commodity, a financial product, or a statistic.

How do futures work?

A futures contract is a tradable contract that relates to the purchase (long) or sale (short) of an underlying asset. Delivery will take place in the future at an agreed date and rate. Buyers and sellers have conflicting expectations of how the price of the underlying asset will perform. A buyer makes a gross profit if the price of the underlying asset is up at the close and a gross loss if the price of the underlying asset is down. When you enter a long position when trading futures contracts, you assume that the price of the underlying asset will rise. As with many other derivatives, futures have a contract size in which each future has a fixed number of the underlying product as an underlying asset.

How are futures settled?

A futures deal’s payment takes place at the conclusion of the predetermined term. This can be done through physical delivery or cash settlement. Index futures, such as B. FTSE futures are usually settled in cash. In the case of physical delivery, the specified goods are actually delivered. However, that doesn’t happen often. As a rule, they are sold before their validity expires.

One of the main reasons for investing in this type of financial product is to make a profit by taking advantage of price differences in the underlying securities. Therefore, cash settlement takes place more frequently than physical delivery. There is no money involved in buying and selling. Only at arrival must the agreed-upon sum be fulfilled. However, brokers require a down payment because of the large commitments made.

Suppose you expect a stock index to go up. It is at 600 points and you are considering a futures contract with a contract size of 200. This futures price would be worth around $120,000. When trading futures, you don’t pay this entire amount at the time of purchase, but typically deposit an initial margin to complete the contract. Suppose the margin rate is 15%. You would get $120,000 exposure to the underlying asset if you deposit at least $18,000 as margin into your account. This means that with a futures contract you can get a large exposure for a small initial margin.

Futures are paid everyday, in contrast to options. This means that if the future has gained 3 points at the end of the trading day, you will receive three times the $200 multiplier, i.e. an amount of $600. Note that with futures it is also possible to lose more than your deposit as the contract size is larger than the margin.

Futures and hedging

Futures are a popular derivative for risk hedging. Companies and investors use them to neutralize risks as much as possible. It does this by removing the uncertainty of a future price of a position or financial product. You can use short hedges and long hedges. In a short hedge, you take a short position on the contract. These are typically initiated by traders who own an asset and are concerned that prices may fall before the sale date. A long hedge, on the other hand, occurs when you take a long position. For example, if a company knows it needs to buy a certain item by a future date and the current spot rate is higher than the future rate, it can lock in the lower rate

Trading futures

Before trading futures, keep the following in mind:

Leverage the ability to manage a sizable investment with only a small sum of money. You should be aware that while this presents an opportunity for high gains, it also carries the risk of substantial losses.

• Explore a variety of investments, such as those in grains, livestock, interest rates, gold as well as other metals, the oil and energy industries, and much more.
• After Hours Market. Futures contracts trade at many various times. Futures markets can also predict how core markets will open. For instance, traders will likely be informed by stock index futures concerning whether the stock market will open higher or lower.
• Liquidity. There is a lot of activity on the futures market, particularly on the high volume contracts, and it is quite busy. This makes entering and exiting transactions simpler. Liquidity issues might exist for less popular, more obscure contracts.
• Lastly is the topic of Hedging. If you already hold a position in a company or commodity, you can utilize a futures contract to safeguard your unrealized gains or reduce your losses. This gives you an option to just leaving your current job. An illustration of this would be to use a short position to balance out a long portfolio.

Opening a new account

You must first open a regular account in order to begin trading futures. An solo or joint account may be used for the regular account. Additionally, you will need to qualify for and have your account’s margin rights granted.

Micro E-Mini Futures: What Are they?

On May 6, 2019, the CME Group introduced micro e-mini agreements for four significant indices. Compared to the current e-mini futures, these contracts offer market players significantly cheaper exposure to price changes in the S&P 500, Russell 2000, Dow Jones 30, and Nasdaq 100 indices. Based on the broker you select, you can effectively hedge your whole portfolio for futures trading by going long or short markets like the S&P500 and Nasdaq100 with as little as $175 of day-trading margin each contract.

These contracts immediately shown great popularity. On June 3, 2019, over 417,000 contracts of the micro e-mini S&P 500 futures were traded, though activity has since dwindled. These micro contract volumes are about 25% of what their considerably more seasoned e-mini cousins are trading in. The contracts are traded in a manner similar to futures trading from Sunday at 5 p.m. central time to Friday at 4 p.m. central time, or nearly 24 hours a day.

How Do Micro E-Mini Futures Work?

When the main indexes’ values grew too high for the typical trader in the late 1990s, e-minis were introduced. Index futures are a type of futures contract that enables buyers to invest or sell a monetary index today for a future settlement date. The magnitude of the micro e-mini contracts is one-tenth that of earlier e-mini contracts, bringing down the price of the trade to one-tenth that of e-minis.

The price of the S&P 500 and Russell 2000 e-minis is $50 times the index value at agreement expiration, compared to merely $5 for the micro e-mini for those two.

The Dow Jones 30 micro e-mini is $0.50 times the index value, and the micro e-mini contract for the Nasdaq 100 index is $2 times the index value. Therefore, the micro e-mini is valued at $14,750 as opposed to the e-mini, that would be valued at $147,500 if the S&P 500 index were to be at 2950.

The 500 U.S. large-cap equities that the S&P 500 index tracks are managed by the micro e-mini S&P 500 index futures. The Russell 3000 array of companies includes 2,000 small-cap stocks, which are exposed through the micro e-mini Russell 200 futures markets.

With the micro e-mini Dow Jones Industrial Average futures and the micro e-mini Nasdaq 100 futures trading, you may give publicity to the 30 blue chip stocks that make up the Dow Jones Industrial Average as well as the 100 top non-financial U.S. large-cap stocks.

With the exception of the Dow micro e-mini future, that will list 4 months, micro E-mini futures would be posted on the conventional U.S. Equity Index futures cycle with five concurrent futures that expire against the starting index value on the third Friday of March, June, September, and December. The CME has not yet stated whether it will allow trading in choices for micro e-mini futures.

Learn more about Emini trading system.

Trading in commodities can be a very lucrative business. You can make millions, or even billions of dollars by trading in the right commodity and following the right strategies.

However, you need to know what you are doing in order to make money out of thin air! In this blog post we will discuss some common commodities that are traded and provide tips on how to begin trading with them

Trading in commodities, if done right, can be very lucrative

Commodity trading can be very lucrative, but it requires careful planning and execution. There are many different ways to make money in commodities, and this article will explore some of them.

Trading on the futures market involves buying a contract at a set price and holding until expiration (when the contract expires). You would sell your position at whatever price is available when you want to exit your position. It’s possible to do this with any commodity or currency pair; however, there are certain markets that may be more liquid than others if you want fast liquidity (e.g., gold vs silver).

Trading on the spot market means buying or selling physical goods such as gold bars or oil barrels directly from producers/exporters without having any prior knowledge about what those products are actually worth—this differs greatly from trading futures contracts where buyers have a plethora of information about how much their purchase will cost them before they buy anything!

Commonly Traded Commodities

• Gold and Silver Trade
• Oil Trade
• Copper
• Agricultural commodities, such as corn, soybeans, wheat and rice. These foodstuffs, are the most common commodities traded on commodity markets today.

Understanding the Market

The first step to trading commodities is understanding the market. To do this, you need to understand how the commodity markets work and what drives them.

Volatility is an important concept that will help you understand these markets.

Volatility refers to how much movement there is in prices over time. It’s usually measured as standard deviation (SD), which is simply a measure of how much randomness there is in data points around their mean value. The greater the SD, the more volatile a given asset’s prices; thus, an asset with higher volatility tends to have bigger swings than assets with low volatility. For example, if someone buys coffee beans for $2 per pound and sells them for $4 per pound within six months—with no other factors affecting this price change—this would be considered “volatile.”

However, if he purchases coffee beans then sells them at exactly $1 per pound when they’re already being sold at $3/lb. elsewhere in world marketplaces like Dubai or Hong Kong; then again within three months another retailer buys up all available supplies from him due solely on speculation alone without any intention whatsoever towards actually making use out of said supply themselves—that would probably not qualify as being highly volatile since most people wouldn’t consider such transactions normal behavior either way!

How to Get Started

To get started, you can start with a demo account. This is a good way to learn the basics of commodity trading and how to use the software.

Once you have mastered your skills on the demo account, there are many ways for you to make money out of thin air:

Trade with a broker

One option is to trade on your own using their platform or by using another company’s platform. This can be useful if your goal is simply testing out different strategies without committing any money until after getting comfortable with them first! Another option would be signing up for margin accounts so that when prices go down in some cases it doesn’t affect your overall balance too much; however, this kind of trading requires more knowledge and experience than just starting off learning how markets work before deciding whether or not this method will suit your needs best.

You can be a successful, rich commodity trader!

Commodity trading is a lucrative career path for many people. The reason why this is so, is because there are several reasons why commodity trading is so popular:

• It’s easy to get started in commodity trading. You don’t need any specific skills or qualifications to trade on commodities; all you need is a computer and an internet connection (or a phone).
• Commodity traders often make good money compared to other jobs available in the market. Their earnings are high enough that they can easily afford their own houses and cars as well as paying off college loans or mortgages on houses purchased years ago when prices were lower than today’s levels!

Conclusion

Commodity trading is one of the most volatile of all types of trading. If you are interested in learning more about this type of trading and how to get started, get in touch with Platinum Trading Solutions. The ultimate platform for all of your trading needs!

Algorithmic Trading Software, also known as a type of Automated Trading System is a form of trading software that allows one to automate a number of the functions of the futures and commodities buying and selling process. Automated Trading Systems such as Algorithmic Trading Software allow one to set the price that they wish to buy futures at and also at which they wish to sell those futures at as well. These futures buying and selling limits are indications that the software uses, alongside its own software and algorithms to decide when futures should be sold and when they should be bought. This process is undertaken autonomously once the relevant buy and sale price indicators are set. One of the major benefits of sales and purchase of futures being done via this Algorithm Trading Software is that trades are executed in far less time and with much more efficiency than if undertaken manually.

Why is Algorithmic Trading Software used?

Day by day commodities and futures trading is becoming more and more competitive. Taking this scenario into account, many trading firms are now working together with developers and programmers to develop and make use of smart algorithms that analyze fluctuations in price, and a variety of other factors, to determine what the best times to execute trades are. This type of Algorithmic Trading Software is designed to follow a specific set of instructions and rules set up by the programmers and developers that determine the optimal time to buy/sell a commodities future. In this way, the trades are only executed when the price actions and all the requirements are met to get the perfect results possible way.

According to Investopedia (A Financial Media Company), approximately 70-80 % of daily executed trades are done so through Algorithmic Trading Software. This statistic clearly demonstrates the case for Algorithmic Trading Software. Such software is commonly used by daily traders as it allows them to easily and efficiently execute trades at speed that they might otherwise miss out on if they were handling them in person physically. In many cases large traders make use of these types of software to turn low margin high volume trades that allow them to earn large sums of money on trades that might not turn heads otherwise.

How does Algorithmic Trading Software work?

Algorithmic Trading Software can only be accessed via software interface and credentials provided by a broker. The software is in turn linked to a Direct Access Broker. The broker sets up specific entry and exit points by usage of different Indicators and Chart Patterns. Through further technical analysis, and experience, the broker develops a Risk Management plan to mitigate the associated commodity trade risks as much as possible. The software then executes the set instructions and performs the task if all the requirements are met.

In this way, the loss is minimized, the number of good trades is maximized, and the chances of facing losses are as diminished as possible. This whole thing is done automatically by Algorithmic Trading Software, devoid of human instruction save that initially provided.

One only requires access to Algorithmic Trading Software, provision of the relevant permissions, and the rest is handled by the Algorithmic Trading Software so that one may then rest easy.

Should you use Algorithmic Trading Software for yourself?

Our suggestion is that every trader make at least some use of Algorithmic Trading Software. The reason for suggesting use of an automated trading system is simple; firstly, the speed of execution of commodity trades via Algorithmic Trading Software and secondly, in general, the aforementioned commodity futures trades are more profitable because the software identifies, evaluates and executes all the most profitable trading opportunities that are, quite simply, impossible for a human to identify on a manual basis.

The other reason is that this trading setup is similar to the Automated Trading Systems used by Hedge Funds, Investment Banks, and even Property Trading Firms. There this type of software is used by many employees and customers, and they provide profitable results. In closing we suggest you use Algorithmic Trading Software designed by our developers to set up your own automated trading system and we guarantee you won’t be disappointed!