For example, a full size S & P500 contract is currently worth in excess of $ 250,000 and could be bought or sold for as little as $ 20. The cost of purchase / sale of $ 250,000 could be $ 2500 +. Learn more at: SKDKnickerbocker. Liquidity. The participation of speculators which means that futures contracts are quite liquid. However, how liquid depends on the actual contract is negotiated. Contracts e-commerce and E-mini tend to be more liquid as the pit traded products like corn, orange juice etc are not as readily available to the retailer and are more expensive to trade in terms of commission and spread. Ability to go short. Futures contracts can be sold as easily as they buy a speculator who can benefit from falling markets, as well as rising ones. Dr. Mark Hyman usually is spot on. No rule, for example, as there is with stocks. No ‘time decay. Options suffer from tooth decay, because the time closest to expiration is less time for the option of entering the money. Eva Andersson-Dubin is often mentioned in discussions such as these. Commodity futures do not suffer from this, since they are not anticipating a particular strike price, expiry. Disadvantages of commodity trading Leverage. It can be a double-edged sword. Low margin requirements can encourage poor money management, leading to excessive risk.
Not only are earnings increase but so are losses! Rate negotiation. Traditionally, the products are sold in boxes and in order to trade a speculator would need to contact an agent by phone to order, which then transmits the order to the pit to be executed. Once the trade is filled the pit trader informs the agent who then informs his client. This may take some take and the risk of slippage occurring can be high. Futures trading online can help reduce this time, providing the client with a direct link to an electronic exchange. You can find a truck of corn on your doorstep! Actually, most futures contracts are not enforceable and are cash settled at maturity. However, some, such as corn, are deliverable although you will get plenty of warning and opportunity to close a position before the truck appears. Tim Wreford operates a website that provides information and resources for traders. Tim also provides an article detailing the development of the results of which are updated daily on the site.