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Independent ground traders

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Category: Beginners Guide

 Other hedgers of futures contracts embrace banks, insurance coverage firms and pension fund corporations who use futures to hedge towards any fluctuations within the money price of their products at future dates.

Speculators include independent ground traders and personal investors. Usually, they don’t have any connection with the money commodity and simply try to (a) make a profit shopping for a futures contract they count on to rise in value or (b) sell afutures contract they anticipate to fall in price.

In different phrases, they spend money on futures in the identical manner they could  invest in stocks and shares - by buying at a low value and selling at the next price.

The Benefits of Buying and selling Futures

Buying and selling futures contracts have a number of benefits over other investments:

Futures are highly leveraged investments. To ‘personal’ a futures contract an investor only has to put up a small fraction of the worth of the contract (often round 10%) as ‘margin’. In other words, the investor can commercea much larger quantity of the commodity than if he purchased it outright, so if he has predicted the market motion accurately, his earnings will likely be multiplied (ten-fold on a 10% deposit). This is a wonderful return compared to shopping for a bodilycommodity like gold bars, cash or mining stocks.

The margin required to carry a futures contract will not be a down payment however a form of safety bond. If the market goes towards the dealer's place, he may lose some, all, or probably greater than the margin he has put up. But if the market goes with the dealer's place, he makes a revenue and he will get his margin back.

 
U.S. Government Required Disclaimer - Commodity Futures Trading Commission

Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this web site. The past performance of any trading system or methodology is not necessarily indicative of future results. CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN. All trades, patterns, charts, systems, etc., discussed in this advertisement and the product materials are for illustrative purposes only and not to be construed as specific advisory recommendations. All ideas and material presented are entirely those of the author and do not necessarily reflect those of the publisher or Tradewins.