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Characteristics of Futures Trading

Futures contracts are by design meant to limit the amount of time and risk exposure experienced by speculators and hedgers. As a result, futures contracts have several key characteristics that enable traders [more…]

Key Futures and Options Exchanges in the U.S.

Several active futures and options exchanges exist in the United States. Each has its own niche, but some overlaps occur in the types of contracts that are traded. Here are the names to know among American [more…]

How Open Outcry Works in American Futures Trading

Around the world, most futures exchanges now use electronic trading. The United States still uses the open outcry system of futures trading for many physical commodities, such as agricultural and oil. [more…]

How to Speak the Language of Futures Trading

If you’re going to trade futures, you have to know trader talk. Here are some key terms that will help you find your way around the market: [more…]

What Do Hedgers and Speculators Do in Futures Trading?

The two major categories of traders are hedgers and speculators. Although these two groups trade in the futures market, they are trying to accomplish very different objectives. [more…]

How to Use Stock Options to Your Advantage

The options market goes hand in hand with the futures markets. When used properly, options give you an opportunity to diversify your holdings beyond traditional investments and to hedge your portfolio [more…]

Comparing American- and European-Style Options

There are two major categories of options: American-style and European-style. Which type you choose depends on the way you want to exercise them, and each has advantages you should know about to make wise [more…]

Options for Trading Investment Assets: Calls and Puts

Two types of options are traded. One kind, a call option, lets you speculate on prices of the underlying asset rising, and the other, a put option, lets you bet on their fall. [more…]

How to Read Option Quotes

When you trade options, you have to look at quote boards on your computer, even if you’re using a broker. The following figure shows you a good generic example of a quote board provided by the Chicago [more…]

How Volatility Affects Option Prices

Volatility, a measure of how fast and how much prices of the underlying asset move, is key to understanding why option prices fluctuate and act the way they do. In fact, volatility is the most important [more…]

Watching Volatility When You Trade Options

When trading options, you want to be able to predict when changes in volatility — and thus changes in prices — are coming. One way to do that is to keep tabs on historical volatility [more…]

How Implied Volatility Figures In Options Trading

The first step to trading options based on implied volatility is to buy and sell them correctly at the best possible price. This may sound difficult but can be made relatively easy by option trading software [more…]

Using "the Greeks" to Measure Risks with Options

Options require you to pick up a bit of the Greek language, which is okay, because you need to learn only four words: delta, gamma, theta, and vega. The Greeks, [more…]

Trading in Futures and Options: Understand the Risk

Futures traders are, by nature, risk takers. And options are an integral part of the trading game that futures traders play, although it is worth noting that options and futures are viable stand-alone [more…]

Questions to Ask before Trading Futures and Options

Before becoming a futures and options trader, you need to know what you're getting into — and what you may get out of the risk-taking experience. Look to this checklist for key questions that can help [more…]

How to Choose a Futures and Options Broker

If you are interested in trading options but aren’t sure about your own ability to trade them, you need to find a good options broker/advisor to help you out. A broker can assist with strategy development [more…]

How the Fiat System Works

The global monetary system is what’s called a Fiat system in which money is a storage medium for purchasing power and a substitute for barter. Each dollar bill, euro, yen, gold ingot, or whatever currency [more…]

Where Does Money Come From?

Central banks create money either by printing it or by buying bonds in the treasury market. When central banks buy bonds, they usually buy their own country’s treasury bonds, and their purchases are made [more…]

What's the Purpose of Central Banks?

Central banks, like the Federal Reserve in the United States, are designed to make sure that their respective domestic economies run as smoothly as possible. In most countries, central banks are expected [more…]

Monetary Exchange Equation Relates Money Supply to Inflation

You can use the monetary exchange equation to explain the relationship between the supply of money and inflation, as follows:

Velocity x Money Supply = Gross Domestic Product [more…]

How Money Supply Affects Commodity Tendencies

As a general rule, futures prices respond to inflation. Some, such as gold, tend to rise; others, such as the U.S. dollar, tend to fall. Here are the basics of money supply/commodity tendencies: [more…]

How Money Flows Affect the Financial Markets

When central banks buy bonds from banks and dealers, they’re putting money into circulation, making it easy for people and businesses to borrow. At the juncture where money becomes easier to borrow, the [more…]

Economic Reports Provide Financial Insights

Economic reports — which include the Consumer Price Index, the Producer Price Index, employment updates, and releases on consumer confidence — are useful resources for making informed investing or trading [more…]

How the Employment Report Affects Financial Markets

The U.S. Department of Labor’s employment report is the first piece of major economic data released each month. The report is released on the first Friday of every month. Bond, stock index, and currency [more…]

What's in the Producer Price Index Report?

The Producer Price Index, or PPI, is an important report, but it doesn’t usually move the markets to the same degree as the Consumer Price Index (CPI) and the employment report. [more…]


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