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Basics of Futures Trading |
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Home Trade Center Inc. Investor Services About Futures Trading About Forex Trading |
What
is a Futures Contract? A futures contract is a standardized, exchange-traded, legally binding agreement to buy or sell a specific type, quantity or grade of a commodity or financial instrument at an agreed upon time and place in the future. Futures contracts are highly regulated by market exchanges-New York Board of Trade, New York Mercantile Exchange, Chicago Mercantile Exchange, Chicago Board of Trade, London Metals Exchange, Eurex Frankfurt, Singapore Exchange-that set the contract specifications for cash and futures contracts. The value of a futures contract is tied to the underlying asset.
Similar to stock and bond trading by institutions and individuals, futures are traded by manufacturers, agricultural, industrial and commercial interests and banks and financial institutions. Futures markets also welcome individual investors as sources of added liquidity and shareholders in risk. However, unlike huge commercial interests that take delivery on contracts, individuals always offset their futures positions prior to contract expiration in order to avoid delivery. |
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FUTURES
TRADING INVOLVES SUBSTANTIAL RISK AND IS NOT SUITABLE FOR ALL INVESTORS.
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