'futures' and where to find them

[newspreadbetter]

Sorry for my ignorance, what are futures, where are they found (no 'in the future' comments guys) and how are they different?

I read lots on here and often whatever I'm reading about, indices etc someone will say the futures

In layman's please, as I'm still a beginner

 

[drtro]

You purchase a contract to buy oil in July in May. You bought oil at $55 in May, instead of it being $65 in July, based on speculation.

Futures can be used either to hedge or to speculate on the price movement of the underlying asset. For example, a producer of corn could use futures to lock in a certain price and reduce risk (hedge). On the other hand, anybody could speculate on the price movement of corn by going long or short using futures.

Futures offers the best bang for your buck, which makes it the most risk.

Futures also offers better tax benefits than other instruments.

Every successful trader (like millionaire successful) trader I know trades Futures or FX. Only an ignorant person would attempt to trade stocks or ETFs, they all say.

 

[hhiusa]

You purchase a contract to buy oil in July in May. You bought oil at $55 in May, instead of it being $65 in July, based on speculation.

Futures can be used either to hedge or to speculate on the price movement of the underlying asset. For example, a producer of corn could use futures to lock in a certain price and reduce risk (hedge). On the other hand, anybody could speculate on the price movement of corn by going long or short using futures.

Futures offers the best bang for your buck, which makes it the most risk.

Futures also offers better tax benefits than other instruments.

Every successful trader (like millionaire successful) trader I know trades Futures or FX. Only an ignorant person would attempt to trade stocks or ETFs, they all say.

No only a poor person would trade futures instead of stocks because they are not subject to the SEC day trading minimum rule and have less stringent margin requirements. Why anyone would trade futures with only $1,000 is beyond me. Futures should be subject to the same $25,000 minimum as all other equities regulated by the SEC. Additionally, futures are regulated separately.

I'll stick with my stocks and funds. You can keep your CFDs, futures and commodities.

I thank you for your bull in a china shop attitude.

 

[Hittfeld]

Hi friends of ignorant google usage,

Less stringent margin requirements? Ever heard of "mark to market"? And you don`t trade futures "with only 1k", but 1k per contract - not per account. To keep your powder dry. If your account is 20k and margin requirement is 10 k you have intraday only 10k to sit out a short term spike. If the requirement is 1k you are left with 19k before you`re out.

Futures are traded via FMC firms, which are less regulated, go broke sometimes (or often), have no industry wide account insurance scheme ...... Lot`s to learn before you understand what you`ve read via google.

Why trade futures? Never heard the magic word TAX? The favourable 60/40 tax treatment for US traders is one of the reasons to trade futures, liquidity, speed and cost of execution are other main reasons.

And even with a 1k only account size there are futures (not SP) I would trade intraday with no hazzle, like the micro sized currency futures and some others.

So, if you`re not allowed to trade CFD`s (being an IRS subject) futures are recommendable.

Regards

 

[hhiusa]

Hi friends of ignorant google usage,

Less stringent margin requirements? Ever heard of "mark to market"? And you don`t trade futures "with only 1k", but 1k per contract - not per account. To keep your powder dry. If your account is 20k and margin requirement is 10 k you have intraday only 10k to sit out a short term spike. If the requirement is 1k you are left with 19k before you`re out.

Futures are traded via FMC firms, which are less regulated, go broke sometimes (or often), have no industry wide account insurance scheme ...... Lot`s to learn before you understand what you`ve read via google.

Why trade futures? Never heard the magic word TAX? The favourable 60/40 tax treatment for US traders is one of the reasons to trade futures, liquidity, speed and cost of execution are other main reasons.

And even with a 1k only account size there are futures (not SP) I would trade intraday with no hazzle, like the micro sized currency futures and some others.

So, if you`re not allowed to trade CFD`s (being an IRS subject) futures are recommendable.

Regards

What exactly do you mean by 60/40 tax treatment? I do not need to invert my taxes any further. My main concern is maintaining separate legal tax identities. I am allowed to trade CFDs but choose not to. You are not actually trading shares when you trade CFDs. They are like contracts for shares. Additionally, you can end up losing more than your initial investment. If you only have $1,000 then the SEC and I are imagining that you are an unsophisticated trader and as such are likely to lose more money. FINRA rule 4210 is there to protect unsophisticated investors from the high risk of day trading.

Why we don't use "regards" anymore
http://www.bloomberg.com/news/articles/2015-06-02/the-best-e-mail-signature-is-actually-the-worst

 

[Hittfeld]

If you are US citizen or US resident you are automatically taxed by the IRS. Ands you woun`t be allowed to trade CFDs .

If you are subject of IRS and trader you would no of the 60/40 taxation advantage of futures trading.

And still using

Regards

 

[hhiusa]

If you are US citizen or US resident you are automatically taxed by the IRS. Ands you woun`t be allowed to trade CFDs .

If you are subject of IRS and trader you would no of the 60/40 taxation advantage of futures trading.

And still using

Regards

Citizenship is only an issue for you it seems. Forming a foreign subsidiary is as good as citizenship. Add a lawyer as a nominee director and you're set.

You’re Ending Your E-mails Wrong
http://www.bloomberg.com/news/articles/2015-06-02/the-best-e-mail-signature-is-actually-the-worst

 

[drtro]

So basically hhiusa's attitude is if you aren't rich and American, you aren't a successful trader.

 

[Atilla]

So basically hhiusa's attitude is if you aren't rich and American, you aren't a successful trader.

fwiw I think his a BIG MEGA wind-up merchant. Take it with a pinch of salt.

I think I know who he is too. Lives under a bridge and comes and goes when he gets lonely. Single child, parents don't know why they had him. Bright but has social issues and suffers from an inferiority complex. Never good enough. Must try harder.

He was the little brat who hogs all the toys and ends up playing by him self in the corner whilst all the other todlers have fun playing outside in the sunshine. Hence, he has no friends. Doesn't know how to connect.

His repeating the same blurb to get reaction.

Some fun guy

 

[drtro]

fwiw I think his a BIG MEGA wind-up merchant. Take it with a pinch of salt.

I think I know who he is too. Lives under a bridge and comes and goes when he gets lonely. Single child, parents don't know why they had him. Bright but has social issues and suffers from an inferiority complex. Never good enough. Must try harder.

He was the little brat who hogs all the toys and ends up playing by him self in the corner whilst all the other todlers have fun playing outside in the sunshine. Hence, he has no friends. Doesn't know how to connect.

His repeating the same blurb to get reaction.

Some fun guy

He said above "Additionally, futures are regulated separately." yet in another thread he was saying the complete opposite, thinking the FINRA has regulation over Futures. Didn't know kids trolled trading forums.

 

[hhiusa]

So basically hhiusa's attitude is if you aren't rich and American, you aren't a successful trader.

How did you come up with that one? When did I imply that if you aren't rich then you are not successful. While richness and successfulness go hand in hand, you can be successful without money. Since we are in a trading forum, the only way I would measure my success is if I am making money.

 

[timsk]

Sorry for my ignorance, what are futures, where are they found (no 'in the future' comments guys) and how are they different?

Hi newspreadbetter,
Futures is a type of financial vehicle, i.e. it refers to the specific product you use to trade, as opposed to your choice of market or 'instrument' within that market. For example, if you want to trade Google - which is just one of thousands of instruments in the stock market, there are lots of financial vehicles for you to choose from. The most common ones are: shares, spread betting, contracts for difference (CFDs), (single stock) futures, options, binaries and warrants. That’s no less than seven different financial vehicles to trade just one instrument!

Futures are normally traded by those who have a degree of experience; they are not really suitable for beginners. Futures can be applied to most markets, i.e. there are equity index futures, single stock futures (SSFs), commodity futures and forex futures etc. So, what are they and how do they differ from trading ordinary shares in the equities market, or trading the current exchange rate in the forex market?

A ‘future’ is a contract which contains an agreement between two parties to buy or sell a specified amount of an underlying asset (e.g. company shares) on a specified date in the future (known as the ‘settlement’ date) at a price agreed today (known as the ‘strike’ price). The underlying asset could be a commodity such as sugar, gold and crude oil, or a financial instrument such as the Emini S&P 500, Eurodollar and U.S. T-bonds. The contract obligates the buyer to purchase and the seller to sell, unless it is offset before the settlement date, which is exactly what happens 99% of the time.

Unlike spread betting (another financial vehicle), where the odds are slightly skewed in favour of the spread betting firm, futures traders enjoy a level playing field because traders transact with one another through a futures exchange such the London International Financial Futures and Options Exchange (LIFFE) or Chicago Mercantile Exchange & Chicago Board of Trade (CME Group). The spreads too can be much tighter than those available to spread betters, although the profits are not tax free and every futures trade incurs a commission charge payable to your broker.

On bulletin boards like T2W, often as not when someone trades futures, they are referring to equity index futures such as the ES, which is the e-mini futures contract for the S&P 500 equity index. The ‘e’ stands for electronically traded and the 'mini' represents a portion of the normal full sized futures contract. There are various reasons to elect to trade e-minis. High on the list is having to use a derivative financial vehicle to trade equity indices as they are not tradable in their own right, unlike traditional shares for example. Therefore, all e-minis are based on - or derived from - the cash index. To learn more about indices and futures - take a gander at this FAQ: Essentials Of 'Indices'
Tim.

 

[hhiusa]

Hi newspreadbetter,
Futures is a type of financial vehicle, i.e. it refers to the specific product you use to trade, as opposed to your choice of market or 'instrument' within that market. For example, if you want to trade Google - which is just one of thousands of instruments in the stock market, there are lots of financial vehicles for you to choose from. The most common ones are: shares, spread betting, contracts for difference (CFDs), (single stock) futures, options, binaries and warrants. That’s no less than seven different financial vehicles to trade just one instrument!

Futures are normally traded by those who have a degree of experience; they are not really suitable for beginners. Futures can be applied to most markets, i.e. there are equity index futures, single stock futures (SSFs), commodity futures and forex futures etc. So, what are they and how do they differ from trading ordinary shares in the equities market, or trading the current exchange rate in the forex market?

A ‘future’ is a contract which contains an agreement between two parties to buy or sell a specified amount of an underlying asset (e.g. company shares) on a specified date in the future (known as the ‘settlement’ date) at a price agreed today (known as the ‘strike’ price). The underlying asset could be a commodity such as sugar, gold and crude oil, or a financial instrument such as the Emini S&P 500, Eurodollar and U.S. T-bonds. The contract obligates the buyer to purchase and the seller to sell, unless it is offset before the settlement date, which is exactly what happens 99% of the time.

Unlike spread betting (another financial vehicle), where the odds are slightly skewed in favour of the spread betting firm, futures traders enjoy a level playing field because traders transact with one another through a futures exchange such the London International Financial Futures and Options Exchange (LIFFE) or Chicago Mercantile Exchange & Chicago Board of Trade (CME Group). The spreads too can be much tighter than those available to spread betters, although the profits are not tax free and every futures trade incurs a commission charge payable to your broker.

On bulletin boards like T2W, often as not when someone trades futures, they are referring to equity index futures such as the ES, which is the e-mini futures contract for the S&P 500 equity index. The ‘e’ stands for electronically traded and the 'mini' represents a portion of the normal full sized futures contract. There are various reasons to elect to trade e-minis. High on the list is having to use a derivative financial vehicle to trade equity indices as they are not tradable in their own right, unlike traditional shares for example. Therefore, all e-minis are based on - or derived from - the cash index. To learn more about indices and futures - take a gander at this FAQ: Essentials Of 'Indices'
Tim.

I do actually understand that; however, if they are more for people with experience why are lower margin requirements? If you have more experience trading, then you should have more than a few thousands dollars (pounds) to trade with. It makes sense to me that they would be more for people with experience, which is why I was curious why people were talking about such low amounts of money. I had to deposit to deposit $20,000 to have a portfolio margin account with IB. They have cash account minimums of $10,000, which cannot leverage and trade on margin. Additionaly it required Why do other brokerage firm have lower requirements as it would seem?

 

[timsk]

Hi hhiusa,

I do actually understand that; however, if they are more for people with experience why are lower margin requirements? . . .

It's a good question. My view is that they are not ideal for beginners precisely because of the lower margin requirements! Additionally, they are a sophisticated product, relative to ordinary share dealing or, even, spread betting. That means that there are people trading them who don't understand them fully and how or why things can go very pear shaped very quickly. Sure enough, trading any financial vehicle without understanding everything about it is a recipe for disaster.

Baring the obvious, I confess that I don't know why the margin requirements and leverage multiples vary quite so much from one financial vehicle to the next. Implied in your post is the PDT rule requiring day traders of U.S. equities to have a minimum of U.S. $25k in their accounts. I may be wrong, but I think the restriction came in after Mark Barton - an day trader - killed 12 people in Atlanta. Perhaps other members know why it is that other products aren't covered by a similar restriction.
Tim.

 

[hhiusa]

I was wondering why drtro was calling me stupid for asking why someone would trade with so little equity. I consider anything under $25,000 for day trading. I read on FINRA's website the rule is to protect unsophisticated trader from excess losses. Since it usually takes all brokerage 1-3 business days to clear, you are trading on margin if you day trade. If you have $25,000 and you place $25,000 round trip trade intraday If you want to place another within that day you will have to do so on margin as your trade doesn't clear immediately. I am baffled how someone can think it's stupid to talk about diversification with any financial instrument. Do you @timsk think people should be trading any financial instrument, especially those that as you say, require more expertise with so little cash. Another question is why an experienced trader would only have a few thousands pound to work with. What good is that experience if they haven't made any money and ending up with a few thousand after that supposed experience seems like a failure to me. If even the staff do not know, I am curious about how someone like drtro would know.

If the guy that you @timsk lost $105,000 in the market, then why would the rule have sprung from that event? You would expect since they put the floor at $25,000 it would be because Mark O. Barton had insufficient funds to work with i.e., less than $25K . $105,000 is more than $25,000 so the rule wouldn't have mattered anyway.

Since I have been told that I don't know what I'm talking about, could you clarify further as most of my questions remain unaswered in the post.

Why do most people on here seem to talk about futures and spread betting whilst simultaneously saying they cannot afford to open an account with a brokerage firm like IB? $10K is not that high. Low income and high experience financial instruments sounds like a recipe for disaster.

Since you are from the UK @timsk, do they not have the same requirements in the UK as they do in the US. Can you trade stocks on the LSE with small amounts of money?

 

[timsk]

Hi hhiusa,

. . . Do you @timsk think people should be trading any financial instrument, especially those that as you say, require more expertise with so little cash.

My personal view is that people should trade with whichever financial vehicle they are most comfortable using and get the best results with.

Another question is why an experienced trader would only have a few thousands pound to work with. . .

There are lots of experienced traders around; that doesn't mean necessarily that they are very good, very profitable or very rich.

If the guy that you @timsk lost $105,000 in the market, then why would the rule have sprung from that event? You would expect since they put the floor at $25,000 it would be because Mark O. Barton had insufficient funds to work with i.e., less than $25K . $105,000 is more than $25,000 so the rule wouldn't have mattered anyway.

I don't know for sure that it did. That's just my understanding, but I'm afraid I can't provide any references or source material to support it - as it's from such a long time ago. As I say, I may be wrong.

Since I have been told that I don't know what I'm talking about, could you clarify further as most of my questions remain unaswered in the post.

I've not said that you don't know what you're talking about and I'm not sure what questions have gone unanswered? For me to clarify further you'll need to clarify what it is that you want clarifying!

Why do most people on here seem to talk about futures and spread betting whilst simultaneously saying they cannot afford to open an account with a brokerage firm like IB? $10K is not that high. Low income and high experience financial instruments sounds like a recipe for disaster.

Pass. You'll need to ask the members concerned.

Since you are from the UK @timsk, do they not have the same requirements in the UK as they do in the US. Can you trade stocks on the LSE with small amounts of money?

I've never traded U.K. stocks, so I'm afraid I'm not familiar with the current requirements, sorry.
Tim.

 

[timsk]

Hi hhiusa,

. . . Do you @timsk think people should be trading any financial instrument, especially those that as you say, require more expertise with so little cash.

My personal view is that people should trade with whichever financial vehicle they are most comfortable using and get the best results with.

Another question is why an experienced trader would only have a few thousands pound to work with. . .

There are lots of experienced traders around; it doesn't necessarily follow that they are very good, very profitable or very rich.

If the guy that you @timsk lost $105,000 in the market, then why would the rule have sprung from that event? You would expect since they put the floor at $25,000 it would be because Mark O. Barton had insufficient funds to work with i.e., less than $25K . $105,000 is more than $25,000 so the rule wouldn't have mattered anyway.

I don't know for sure that it did. That's just my understanding, but I'm afraid I can't provide any references or source material to support it - as it's from such a long time ago. As I say, I may be wrong.

Since I have been told that I don't know what I'm talking about, could you clarify further as most of my questions remain unaswered in the post.

I've not said that you don't know what you're talking about and I'm not sure what questions have gone unanswered? For me to clarify further you'll need to clarify what it is that you want clarifying!

Why do most people on here seem to talk about futures and spread betting whilst simultaneously saying they cannot afford to open an account with a brokerage firm like IB? $10K is not that high. Low income and high experience financial instruments sounds like a recipe for disaster.

Pass. You'll need to ask the members concerned.

Since you are from the UK @timsk, do they not have the same requirements in the UK as they do in the US. Can you trade stocks on the LSE with small amounts of money?

I've never traded U.K. stocks, so I'm afraid I'm not familiar with the current requirements, sorry.
Tim.

 

[hhiusa]

Hi hhiusa,
My personal view is that people should trade with whichever financial vehicle they are most comfortable using and get the best results with.

I understand that part except that it does not address the monetary issues I was asking about.

Pass. You'll need to ask the members concerned.

I tried that to no avail to be called stupid.

I've never traded U.K. stocks, so I'm afraid I'm not familiar with the current requirements, sorry.
Tim.

I don’t think I follow. You don’t trade in the UK or just UK stocks? Why is that? Do you invest or day trade at all? Your profile says that you are in the UK? Do you trade in the US?

 

[timsk]

Hi hhiusa,

I understand that part except that it does not address the monetary issues I was asking about.

Lots of members ask questions which, for one reason or another, don't get answered. Or, more often, the answers they receive aren't the answers they wanted to hear. I don't know if either of these apply to you as I'm not clear what questions you're referring to.

I tried that to no avail to be called stupid.

Don't worry about it. I can assure you I've been called far worse things than stupid over the years!

I don’t think I follow. You don’t trade in the UK or just UK stocks? Why is that? Do you invest or day trade at all? Your profile says that you are in the UK? Do you trade in the US?

I live in the U.K. and trade the DAX in the morning and the DOW in the afternoon. Hope that's clear!
Tim.

 

[hhiusa]

Hi hhiusa,

Lots of members ask questions which, for one reason or another, don't get answered. Or, more often, the answers they receive aren't the answers they wanted to hear. I don't know if either of these apply to you as I'm not clear what questions you're referring to.

Well to clarify, what amount would you recommend trading futures or CFDs with? Is a few thousand pounds truly sufficient? Since they are a more sophisticated product, do you think that the rule for day trading should apply to them as well and; thus, a $25,000 minimum.

I live in the U.K. and trade the DAX in the morning and the DOW in the afternoon. Hope that's clear!
Tim.

Could you tell me what types of financial instruments you trade? Which brokerage firm do you use? You said that you trade the DOW in the afternoon. Could you clarify what you mean by you trade the DOW? Are you trading the
Dow Jones E-mini on the CBOT? Which of these below do you trade? I noticed that you didn't mention anything from the U.K. Is it because of stamp duty? Many people here are talking about the DAX. Is there a reason you choose the DAX above all other European markets?