Fantastic Futures Plr Ebook

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Table Of Contents

Foreword

Chapter 1: Futures Trading Basics

Chapter 2: How To Handle Futures Contracts And Exchanges

Chapter 3: Defining The Arbitrage Arguments And Expectations

Chapter 4: Who Trades Futures And How To Become One

Chapter 5: Cautionary Guide To Futures Trading

Chapter 6: Why Futures Traders Fall Short Or Fail Altogether

Chapter 7: What To Look For When Seeking Professional Futures Trading

Wrapping Up

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Chapter 2: How To Handle Futures Contracts And Exchanges

Synopsis

The various types of futures contracts reflect the many different kinds of tradable elements which the contract is designed to be based upon. These may include commodities, securities such as single stock futures, currencies or intangibles such as interest rates and indexes.

Future’s Exchanges

Futures contracts can be based on foreign exchange market arrangements, money market arrangements, bond market arrangements, equity market arrangements, and soft commodities market arrangements. The existence of the derivative markets will provide the price discovery and risk managements. This will ensure the markets for the underlying assets are more efficient and permits trading at low transaction costs.

The exchange traded contracts are standardized according to the stipulations in the exchange platforms the trade from. The exchange contract will depict several details corresponding to the transaction, such as the currency it is being dealt in, the trade intended, the minimum tick value and the last trading any and expiry. The exchanges are normally regulated according the governing body in office at the time the futures contracts are drawn. These exchanges will accommodate the actual trading exercise and only the members can be involved in the exercise. These exchanges are also responsible for the futures contracts being kept and terms of the contracts fulfilled accordingly. As such an exchange effectively plays quite a pivotal role in ensuring all transactions adhere to the stipulations within the contract rules which are based on the exchange used. The exchange also has penalties in place to deal with discrepancies and any under handed techniques that are found to be used during transactions.

The validity of a futures contract depends largely on the understanding of the two parties involved in the transaction. The exchange used will be part of the organizing organ that play the role of a designated representative that acts to guarantee the validity of the contract and will act to enforce it according to the terms stipulated.

Chapter 3: Defining The Arbitrage Arguments And Expectations

Synopsis

Sometimes complications may arise and then there would be a need to have such situation dealt with in a fair and manageable fashion. This could come in the form of having deliverable assets exists in plentiful supply or in surplus, thus causing the forward price which represents the expected future value of the underlying amount to be at risk. Here there should be a need to have the theoretical price which was agreed upon and afforded by the investors as a riskless profit opportunity, which is where the arbitrage arguments can sort out.

What To Do

In the ideal market scenario, the relationship between the futures and the spot prices would largely depend only on the variable visible as mentioned above. However, the various market imperfections more commonly entail a different playing field, where there are elements such as transaction costs, differential borrowing and lending rates, and restrictions on short selling that eventually prevent the complete arbitrage exercise from enfolding. This then will contribute to the futures price varying within the arbitrage boundaries around the theoretical agreed price.

When there is an opposite situation where the deliverable commodity in not in plentiful supply or surplus due to the fact it actually does not exists yet, the rational pricing cannot be fully applied effectively, ensuring the arbitrage mechanism cannot be applied. In such instances the price of the future is determined by the current supply and demand in place for the underlying assets in the future.

The design of the relationship is such, that the “no arbitrage” setting will not affect the positioning of the stipulation within the contract, where the risk neutral probability is still maintained. This would mean a futures price would accommodate the speculator to ensure the eventual break. This scenario is achievable even when the futures market fairly prices the deliverable commodity.

Chapter 4: Who Trades Futures And How To Become One

Synopsis

There are two main categories of players within the futures market platform and they are commonly referred to as hedgers and speculators. Each has differing contributions and styles to the futures trading platform, but both are equally effective at their individual chosen exercise.

Examine It Well

The hedgers are usually entities such as farmers, manufactures, importers and exporters where the buying and selling process in the futures market is basically to secure the future price of the intended commodity. This is then to be sold at a later date in the cash market. This is where the profits are made while still ensuring the protection against price ricks. Thus the hedgers are the facilitators that provide a means to lock in as acceptable price margin between the cost of the raw material and the eventual retails cost the final product procures.

Speculators on the other hand do not focus too much on the aim to minimize the risk for the futures trading, but rather they focus on the benefits that may arise from the risky nature of the futures market. The speculators main aim is to profit from the price change that the hedgers are busy protecting themselves against. Speculators capitalize on the anticipations of high risks and therefore expect to maximize on the profits. Speculators do not seek to actually own the commodity featured in the transaction but will enter the market simply to seek profits by offsetting the resign and declining prices through the buying and selling of contracts.

There are a few ways to venture into the futures trading market but it should be notes that all involve some level of risks. It can be done simply by trading on one’s own account or opting to have an account managed by professionals either as individual entities or as companies. There is also the possibility of joining a commodity pool where working together with others may be beneficial in terms of garnering relevant information.

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