Learn how to trade futures and explore the futures market

This enables traders to transact without performing due diligence on their counterparty. For information on futures markets in specific underlying commodity markets , follow the links. Delayed Quotes Block Trades. Customer margin Within the futures industry, financial guarantees required of both buyers and sellers of futures contracts and sellers of options contracts to ensure fulfillment of contract obligations. We adhere to strict standards of editorial integrity.

Each futures contract represents a specific amount of a given security or commodity. The most widely traded commodity futures contract, for example, is crude oil, which has a contract unit of 1, barrels. Each futures contract of corn, on the other hand, represents 5, bushels – .

What is a 'Commodity Futures Contract'

TradeStation and Generic Trade do a good job of serving two different types of futures traders. In the sections below, we highlight the standout firms in various categories. Each excels in different ways: TradeStation is a strong choice for seasoned tech-savvy futures traders. Futures trading can become costly quickly. Investors can be subject to platform fees, data-feed fees, minimum-activity fees and fees to access premium reports and other research.

When companies cut costs for one service they often make up the difference elsewhere, typically by charging platform and data fees. Both brokers have tiered commission schedules based on monthly volume.

Lightspeed customers also have free access to its WebTrader platform where Level 1 quotes are free, and can also pay a monthly subscription fee for other professional-grade platforms. These brokers offer the highest level of real-time data and quotes, charting and screening tools, technical indicators and a wealth of free research. Interactive Brokers ably serves both retail and professional clients with three trading platforms, including its Trader Workstation, Web Trader and desktop options.

The broker also offers a full-featured mobile app. Traders who want the most leverage will appreciate the low day-trade margins at these brokers. Futures contracts are highly leveraged: That sounds like a good thing, and it is. But it also adds to the risk: Leverage can lead to bigger gains and bigger losses, and if your account dips below the maintenance-margin requirement, your broker may issue a margin call that requires you to add funds immediately.

That means you need money available above and beyond any positions you hold. But futures contracts are often bought and sold within the same day, and some brokers offer a reduced margin requirement for day trades; generally a percentage of the initial margin requirement. These brokers offer phone support around the clock when futures markets are open, in addition to online educational resources.

But even experienced traders need assistance: It can take time to adjust to a new trading platform, and many of the best ones are so advanced that even the most-active traders could use a road map. Look for hour service from Sunday afternoon through Friday evening. NerdWallet adheres to strict standards of editorial integrity to help you make decisions with confidence.

Some of the products we feature are from partners. The bottom line is, pick the general market direction to become successful over the long-term. We also believe in using stops based on futures settlements, not based on the value of the option. If a market settles above or below an area you believed it shouldn't and the trend appears to have reversed based on the charts, it's probably a good time to exit your positions.

We can help you understand the risks and rewards involved, as well as how to react to certain situations, i. We can either assist your option writing style or recommend trades and strategies we believe are appropriate, using the above guidelines. Most futures options expire worthless and out of the money, therefore most people lose when buying options on futures. Cannon Trading believes there is still opportunity in buying , but you must be very patient and selective.

We believe buying futures options just because a market is extremely high or low, known as "fishing for options" is a big mistake. Refer to the guidelines on our "Trading Commandments" before purchasing any futures options. Historic volatility, technical analysis, the trend and all other significant factors should all be analyzed to increase your probability of profit.

All full-service accounts will receive these studies, opinions and recommendations upon request. Cannon Trading Company's "Trading Commandments" can be used as a guideline to assist you in the process and decision making of selecting the right market and futures options to purchase. A common strategy we implement involves the writing and buying of futures options at the same time, known as bull call or bear put spreads.

Ratio and calendar spreads are also used and are recommended at times. Please do not hesitate to call for help with any of these strategies or explanations. Here are a few examples we use often: If coffee is trading at 84, we can buy 1 coffee call and write 2 calls with the same expiration dates and 30 days of time until expiration. This would be in anticipation of coffee trending higher, but not above in 30 days. We'd be collecting the same amount of premium as we're buying, so even if coffee continued lower we'd lose nothing.

Our highest profit would be attained at based on options on futures expiration. To determine risk we'd take the difference between and , which is 35 points and divide it by two, because we sold two calls for every one purchased.

You'd then add the Risk lies if coffee rises dramatically or settles over A typical calendar spread strategy we use often would be to write 1 option with about 25 days left until expiration and buy 1 with 60 days left. If coffee was trading at 84 and we thought prices might be heading slowly higher. We can write 1 coffee call with less time and buy 1 coffee call with more time in the anticipation that the market will trend higher, but not above the strike before the first options on futures expiration.

Some additional risk here lies in the difference between the two contract months. The objective is, if coffee trades higher over the next month but not above the strike price, we'd collect the premium of the option we sold by letting it expire worthless.

In addition, the option we purchased may also profit if coffee rises higher, but it may lose some value due to time decay if coffee doesn't rally enough. Some futures options trade based on different futures contract months and should always be considered in your trading. Don't hesitate to call for help with any of these strategies or explanations.

Remember, the key is still going to be picking the general market direction correct. Therefore, you must analyze and study each market situation with several different trading scenarios and determine which one best suits your risk parameters. The art of trading these strategies is deciding when, where, which futures markets, and what ranges to use.

If you are an inexperienced options trader use these strategies through the broker assisted program. The material contained in 'Futures Options Trading ' is of opinion only and does not guarantee any profit. These are risky markets and only risk capital should be used. Past results are not necessarily indicative of future results.

Cannon Trading Company, Inc. Service Details Why Cannon Trading? Start Your Own Trader's Profile. Help Me Choose a Platform. Futures Options Trading First Steps: When Futures Options expire, they are worthless. Most of the time, Futures Markets have no trend.

Best Futures and Commodities Brokers 2018

Futures & Options Trading Chiodo Commodities, Inc. is a full service introducing broker of ADMIS. We offer a variety of services including access to low cost electronic trading platforms for those who like to trade on their own. A commodity futures contract is an agreement to buy or sell a predetermined amount of a commodity at a specific price on a specific date in the future. Trading in commodity futures contracts. Futures trading is complicated business, even for experienced investors, and so is shopping for a brokerage to use for futures and commodities trading.


A put is the option to sell a futures contract, and a call is the option to buy a futures contract. For both, the option strike price is the specified futures price at which the future is traded if the option is exercised. Futures options can be a low-risk way to approach the futures markets. Many new traders start by trading futures options instead of straight futures contracts. There is less risk and volatility when buying options compared with futures contracts. Options on futures began trading in Today, puts and calls on agricultural, metal, and financial (foreign currency, interest-rate and stock index) futures are traded by open outcry in designated pits.

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