Commodity Futures Trading Simple Facts
Futures trading is different from the trading that happens on the stock market. First of all, the U.S. stock market is open 9:30 am-4 pm EST. On the futures markets you can trade from the opening of the Asian session at 6 pm EST to 5 pm the next day, when New York closes, 5 days a week.
The following table lists the largest futures exchanges in the world and the commodities that are traded at each.
|Chicago Board of Trade (CBOT)||Chicago, USA||Grains, Energy|
|Chicago Mercantile Exchange (CME)||Chicago, USA||Livestock|
|New York Mercantile Exchange (NYMEX)||New York, USA||Softs, Base Metals, Energy, Precious Metals|
|London Metal Exchange (LME)||London, UK||Base Metals|
|NYSE Euronext (Euronext)||Paris, France||Grains, Softs|
|Tokyo Commodity Exchange (TOCOM)||Tokyo, Japan||Softs, Base Metals, Energy, Precious Metals|
|Tokyo Grain Exchange (TGE)||Tokyo, Japan||Grains, Softs|
Here are some of the most popular futures markets that are being traded these days.
1. Currency trading.
This is widely known as the FOREX that stands for the foreign exchange. Some of the well-known currencies that are being traded include the Euro, the Swiss Frank, the Australian Dollar, the British Pound, the Japanese Yen and the US Dollar.
There are many crops and produce that this department can sell. ICE (Intercontinental Exchange) is the center of global trading in soft commodities. Now known as ICE Futures U.S., the exchange offers futures and options on futures on soft commodities including coffee, cocoa, sugar, cotton and frozen concentrated orange juice. Sugar No. 11 is the benchmark contract for the global sugar market which is one of the world’s ten largest agricultural futures markets. ICE Futures Europe lists London softs markets including cocoa, coffee and white sugar.
3. Energy Futures.
This includes gas and the oil futures. The market for this one has got to do with anything that fuels and lights up people’s lives.
4. Interest Rate.
This not only includes interest rates but also bonds and other kinds of financial transactions. Examples include Treasury-bill futures, Treasury-bond futures and Eurodollar futures.
The most common materials being traded for this sector include the kinds of metals like silver and gold.
Participants in a futures contract are required to post margins in order to open and maintain a futures position. Margins are financial guarantees required of both buyers and sellers of futures contracts.
Before a futures position can be opened, there must be enough available balance in the futures trader’s margin account to meet the initial margin requirement. This money is held by the exchange clearinghouse as long as the futures position remains open.
The maintenance margin is the minimum amount a futures trader is required to maintain in his margin account in order to hold a futures position. The maintenance margin level is usually slightly below the initial margin.
If the balance in the futures trader’s margin account falls below the maintenance margin level, he or she will receive a margin call to top up his margin account so as to meet the initial margin requirement.