If you’re looking to make some money you should consider futures trading
While most people think of stocks and bonds when they think of trading, futures are a very popular and potentially lucrative option. We’re certainly not saying that either stocks or bonds are bad financial instruments to investment in. However, we do believe that diversification can be a very good thing.
Futures offer one of the best ways for someone looking to trade commodities to get in on the market. A commodity refers to something like gold, silver, oil, wheat, or corn. Commodities are unique because the “grade” of a commodity is all that really matters, while the specific goods themselves are interchangeable. A bit confused? Think of it this way, one barrel of Brent crude oil is interchangeable with another barrel of Brent crude. As long as you have a barrel of Brent crude they’ll be of the same worth to you.
Commodities are often something consumed in mass, such as corn, or something that is used as an input to make other things. For example, a barrel of Brent crude can be used to create plastics, energy, and numerous other things. As such, it is only the end product that’s most important, not the input.
Commodity producers often sell commodities through futures. This means the buyer and seller will draw up a contract now with the price and amount to be sold pre-determined. The seller, however, will not deliver the goods until some future point in time. Futures allow farmers and other commodity producers to get access to money now, rather than later. At the same time they allow people who need commodities to have access to a steady and reliable supply.
Many of the people who buy futures these days, however, are financial traders who are looking to cash in off of price changes. By predicting the rise and fall of commodity prices, markets, and other things that futures can be derived from, traders can make tons of cash.
Understanding More About Futures and Commodities Markets
If someone were to ask you where most stocks in the United States (and even the world) are traded, you’ll almost certainly respond “Wall Street” or “New York”. But what would you say if they asked you about futures and commodities? If you said New York you’d be wrong! Why? Because traders trade most commodities in Chicago!
The Hub for Futures
Chicago became the hub for futures because of its position at the center of the so-called “bread basket” of America. Once upon a time cowboys used to drive cattle north from Texas, while crops would pour in across the Midwest. Once the goods arrived in Chicago they were sold and transported where ever need be. Traders buy and sell many of these things via futures, so it made perfect sense for futures markets to be based out of Chicago.
Also, the Commodity Futures Trading Commission or CFTC, regulate commodities. The commodities market’s own regulatory authority sets the rules and regulations for trading commodity futures. Authorities set up this regulatory authority specifically to monitor futures because they are very different from stocks, bonds, and other types of financial instruments.
Market Futures and Stock Indices
Also, besides commodities you can also purchase market futures. The market pegs these futures to the performance of stock indices rather than commodities. Market futures are a great way for an investor to invest money when trying to predict the movement of entire markets, so if you like studying and predicting economic trends, consider investing in them.
Futures trading can be very lucrative. Whether you’re looking to trade commodities futures, or market futures, the futures market can offer great investing opportunities. If you’re looking to diversify outside of stocks, you should definitely consider futures. They offer many opportunities and have many key advantages over stocks. Of course, investors need to take time to find the investments and financial instruments they are most comfortable with. Futures are certainly worth a close consideration.