Future option trading basics

By: inlanger Date: 21.06.2017
future option trading basics

A futures contract is an obligation to buy or sell a commodity at or before a given date in the future, at a price agreed upon today. One of the benefits to the futures industry is that contracts are traded on an organized and regulated exchange to provide the facilities to buyers and sellers.

Options Trading in by oxicivaru.web.fc2.com

Exchange-traded futures provide several important economic benefits, but one of the most important is the ability to transfer or manage the price risk of commodities and financial instruments. A simple example would be a baker who is concerned with a price increase in wheat, could hedge his risk by buying a futures contract in wheat.

Not all futures contracts provide for physical delivery, some call for an eventual cash settlement. In most cases, the obligation to buy or sell is offset by liquidating the position. The profit or loss from the trade is the difference between the buy and sell price, less transaction costs.

Gains and losses on futures contracts are calculated on a daily basis and reflected on the brokerage statement each night. This process is known as daily cash settlement.

future option trading basics

US futures trading is regulated by the Commodity Futures Trading Commission CFTC and the National Futures Association NFA. The CFTC is an independent federal agency based in Washington, DC that adopts and enforces regulations under the Commodity Exchange Act and monitors industry self-regulatory organizations.

Futures Trading Basics | NinjaTrader

The NFA, whose principal office is in Chicago, is an industry-wide self-regulatory organization whose programs include registration of industry professionals, auditing of certain registrants, and arbitration. Futures, foreign currency and options trading contains substantial risk and is not for every investor.

future option trading basics

An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones financial security or lifestyle.

Only risk capital should be used for trading and only those with sufficient risk capital should consider trading.

Trading Options on Futures Contracts | Investopedia

Past performance is not necessarily indicative of future results. View Full Risk Disclosure. Risk Disclosure Privacy Policy.

Skip to main content. Commissions Open Account Platform Tour Try NinjaTrader: Main menu Brokerage Commissions All Available Markets Margins Forex Managed Futures Platform Platform Tour Purchase Data Providers Continuum Support Account Support Funding Instructions Forms Library Platform Support Emergency Trade Desk Education Training Webinars CME Resource Center Ecosystem Exchange Education Get Started Futures Open Live Account Free Demo Forex Open Live Account Free Demo Purchase Platform.

What Kind of Futures Products Can I Trade? Why Trading Futures Involves Risk Futures vs Stocks Forex Options Glossary of Terms Trader Links Compliance. About Us Contact Us Site Map.

inserted by FC2 system