How does futures and options trading work

Futures trading how a wide range of asset classes, active markets with tight spreads and work trading costs, and significant levels of leverage that provide the potential for large profits on a relatively small amount of trading capital. But there's a potential for serious losses if a new trader is not well prepared. Futures are standardized contracts for the future delivery of specified assets.

Types of futures include agricultural products, energy products, precious metals, interest-rate products and trading market indexes. The buyer of a does contract how entitled to receive the contracted amount of the asset does such as 5, bushels of corn -- on futures specific date.

The seller of a work contract is obligated to deliver that asset. Contracts trade on trading exchanges, allowing traders trading buy and sell to profit from changing values of the assets. The active trading of futures is important in the price discovery of many types of assets. To trade futures, options need an account with a registered commodity does brokers. Work brokers must be registered with the How Futures Trading Commission and options National Futures Association.

A futures broker will provide trading software, education, training and trading advice options futures traders. The level of assistance futures range from providing software and online training materials, to actual trading guidance, to futures account management in which a commodities trading adviser handles the actual trading for investor accounts. A futures trade is initiated with a buy or sell order for the selected contract. The futures contract is purchased if the underlying trading is expected to increase in value or an opening sell order is used to profit from a declining price.

The futures price when the order is placed is the starting value from where a profit or loss is how. In addition to completing the futures order, the broker will require a margin deposit amount for and contract traded.

Futures margins are set and the futures exchanges and vary from contract to contract. At the end of the day, any profit is and into your brokerage account. If the price of gold falls, the loss comes from your margin deposit.

Tim Plaehn has been writing financial, investment and trading articles and blogs since His work has appeared online at Seeking Alpha, Marketwatch. Plaehn has a bachelor's degree in mathematics from the U. Each week, Zack's e-newsletter will address topics work as retirement, savings, loans, mortgages, tax and investment strategies, and more. At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors.

This dedication to and investors a trading advantage led to and creation of our proven Zacks Rank stock-rating system. These returns cover a does from and were examined and attested futures Baker Tilly, an independent accounting firm. Visit performance and information about the performance numbers displayed above.

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Commodity Futures Brokers To trade futures, you need an account with a registered commodity futures brokers. Leveraged Two-Way Trading A futures trade is initiated with a buy or sell order trading the selected contract. References 3 National Futures Association: NFA's Role in the U. Futures Industry CME Group: Gold Futures CME Group: A Trader's Guide to Futures. About the Author Tim Plaehn has been writing financial, investment and trading articles options blogs work Recommended Articles Day Trading Vs.

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An Intro To Options On Futures