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What Is Index Futures Trading?
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Futures trading is often misconceived as a complex, high stakes and risky venture. This is far from the truth. The misconception springs from the lack of the proper financial know-how about the subject and a clear understanding of what it is for.
What is index futures trading?
Index or stock futures trading is the buying or selling of a set quantity and quality of a financial instrument, which will then be delivered and settled at a predetermined time in the future at a price set during the time of purchase.
Institutional investors typically make use of stock index futures to hedge positions of the underlying stocks in their portfolio.
A futures contract therefore, is a type of investment instrument, in which two investors agree to negotiate on a set of financial instruments or physical commodities for delivery at some future date, usually three months, at a set price.
If you invest on a index futures, you are agreeing to buy something that is not physically there yet at a fixed price. But participating in online futures trading does not necessarily mean that a buyer or a seller will be accountable for receiving or delivering huge inventories of physical goods.
Participants in the index futures market primarily enter into futures contracts to minimize risk or speculate rather than to exchange physical goods with a goal of earning a profit.
As market prices are highly volatile and susceptible to economic movement, the futures market is a game of both chance and wit, therefore, definitely not for the risk averse.
Basically, index futures exchanges offer two venues for trading: the conventional floor-trading venue and online trading.
Regardless of venue, trading is essentially the same in either format: Customers submit orders to be carried out by other traders who take equal but opposite positions, trading at costs which other customers buy or purchasing at prices which other customers sell. This matching of buyers and sellers occur in both floor and online trading.
The main difference is that in floor trading, orders are relayed to brokers in a trading pit, via phone calls from customers or through computers. Customer bids and offers are presented by brokers to other brokers standing in the pit, and matches are made.
Results of the trade are relayed to customers, then sent to clearing house and brokerages, and prices are spread instantly throughout the world. The order is time-stamped at the opening and closing of the trade.
For online trading, customers send buy or sell orders directly from their computers to an electronic marketplace offered by the exchange. Brokers are no longer needed to submit and execute orders for the customers as brokerage approval to trade as well as notice of activity to brokerages are instantly carried out by the computer. Notice the absence of the brokers in online futures trading?
The exchange online system notes all trading activity, and pinpoints matches of bids and offers. Trade information is then sent to the brokerage and clearing house, therefore prices are faster relayed to the public.
Futures Trading Indicators News
CFTC PRECIOUS METALS: Funds Stock Up On Gold For 4th Week - Wall Street Journal
CFTC PRECIOUS METALS: Funds Stock Up On Gold For 4th Week Wall Street Journal By Tatyana Shumsky Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--Managed funds flocked to bullish bets on gold for the fourth consecutive week, according to Friday afternoon data from the Commodity futures Trading Commission. |
NY cotton settles lower as USDA report weighs - Reuters
NY cotton settles lower as USDA report weighs Reuters Open interest in cotton , an indicator of investor exposure in the market, rose to 193308 lots as of Feb. 9, the highest since the middle of April last year, ICE Futures US data showed. Volume traded on Friday was more than 31000 lots, more than double ... |
Oil falls on Greece deal doubt, but up on week - Reuters
 Moneycontrol.com | Oil falls on Greece deal doubt, but up on week Reuters Speculators raised their net long positions in US crude futures and options in the week to February 7, Commodity Futures Trading Commission data released on showed. Brent's premium to US crude was little changed, hovering around $18.65 a barrel. Oil hit with profit taking selling on Greece concerns Oil rises above $99 in Asia as weak US crude demand offsets improving overall ... Crude Oil Ends Lower On Greek Deal Uncertainty |
Stock market rises Thursday, but overnight losses erase gains - Futures Magazine
Stock market rises Thursday, but overnight losses erase gains Futures Magazine Small plusses were posted by major indexes Thursday. But overnight trading losses in futures with potential for day session carry over effectively erased all of those day gains. Trading volume was up about 2% in the S&P 500 Thursday. |
Morning MarketBeat: Bullish Sentiment Surging - Wall Street Journal (blog)
Morning MarketBeat: Bullish Sentiment Surging Wall Street Journal (blog) By Steven Russolillo Market tone: Stock futures lower; dollar up slightly; Treasurys higher; Brent lower at $117.77, Nymex down at $99.13; gold lower at $1719.50. Overnight action: Greece is hit by 48-hour strike ; Barclays caps cash bonuses; ... |
Wall St Week Ahead: Bulls will not be tamed by weak earnings - Reuters
 Moneycontrol.com | Wall St Week Ahead: Bulls will not be tamed by weak earnings Reuters * S&P up nearly 7 percent for year * Sixty-three pct of S&P 500 earnings beat estimates * Option traders brace for volatility on Greek news By Angela Moon NEW YORK, Feb 10 (Reuters) - Despite a mediocre earnings season and signs of an overbought market ... Overbought market due for a correction |
Traders bullish on copper considering inventory levels - Vancouver Sun
Traders bullish on copper considering inventory levels Vancouver Sun Hedge funds and other money managers are holding their biggest bet on rising prices since early August, Commodity Futures Trading Commission data show. Inventories tracked by the London Metal Exchange are already at a two-year low after global mine ... |
NY cotton settles lower as USDA report weighs - Reuters
 Business Recorder | NY cotton settles lower as USDA report weighs Reuters (Factbox on US cotton plantings in 1998 to 2011: ) Open interest in cotton , an indicator of investor exposure in the market, rose to 191651 lots as of Feb. 8, the highest since the middle of April last year, ICE Futures US data showed. Volume traded ... New York cotton settles lower as USDA report weighs |