online futures trading

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Online Futures Trading

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To some, online futures trading may seem a little strange.

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After all, what is the point of hurrying to buy or sell a futures contract on December 2021 Light Sweet Crude futures?

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There are two aspects of online futures trading that make sense of such a situation.

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One is that the internet makes it easy to trade equities in general and specifically futures online.

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One no longer needs to call a broker as request a trade but rather can open an online trading account and execute trades from a personal computer.

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The other reason that online futures trading of contracts the expire years hence is that the value of even a contract for 2021 delivery can change value in a moment due to changes in supply and demand.

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For example, the dramatic increase in oil production in the United States due to fracking technology makes it likely that played out oil fields the world over may be able to resume production for many years to come.

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This changes the long term supply and demand issue and can dramatically change the price of oil for delivery years hence or change the face of trading agricultural commodities such as the advent of the Green Revolution.

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Available Futures Contracts

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The CME Group offers futures contracts for a broad range of agricultural commodities, energy products, industrial and precious metals, foreign exchange, stocks, interest rates and even the weather.

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In each case traders can use online futures trading to buy or sell a variety of contracts deliverable in the coming months or years. Much of the futures market has to do with hedging investment risk.

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For example, a gold mining company or sugar beet producer may choose to establish a sell position a year from now

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The company may believe that the price of their product may fall and they can guarantee what they believe to be a fair price by entering into a futures contract.

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The company may actually make delivery of the product in question or it may simply exit the contract by executing a buy contract prior to expiration.

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In either case the company accomplishes its goal of hedging risk.

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On the other hand, a speculator uses online futures trading in search of profits in whichever commodity, equity, or currency there is sufficient volatility.

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Unlike a company which is tied to a specific product, a speculator can survey the market and trade the futures contracts of his or her choice.

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In each case, fundamental and technical analysis are essential to profitable online futures trading.

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What Are Your Options in Online Futures Trading?

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One of the options in online futures trading is, in fact, trading futures options.

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One can trade options on futures just as on stocks and currencies.

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In general, a trader purchases calls or puts on either a buy or sell contract.

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The call gives him the right to purchase and the put gives him the right to sell.

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In both cases the purchase of an options contract entails to risk beyond the loss of the price of the options contract as the trader will not execute a trade unless it leads to a profit.