Open An Account
Free Demo Account Subscribe Here

Category: Futures Trading

Futures trading is done by two main parties, one of which is the hedger and the other one is the speculator. Where a speculator is there to trade for either their own accounts or that of their clients, a hedger always uses futures as a possible protection from losses. Hedgers can also be described as individuals or business owners who are more risk averse. Speculators and hedgers are likely to benefit from futures trading if the trader has a strong ability to analyze the markets and understands that future behavior. Though futures can behigh risk, they offer an equally high return and are thus very tempting.

In case you are new to futures trading you need to understand how things work. We at Cannon Trading are there to help with your understanding of all the elements of futures trading and also counsel and advise you with the same. Our knowledge base featured on our website, is a store house of information. In order to know every aspect of futures trading, you must read through these articles that have been listed in this category archive. Go through it and get better informed!

Trading Videos 101 & Support and Resistance Levels 10.08.2021

Posted on by Ilan

Dear Traders,

Get Real Time updates and more on our private FB group!
🙂

Trading Videos 101: Curious on an indicator that can help you with EXITS? How about using a certain indicator as a trailing stop?

Watch the latest trading videos we have posted and see if you can pick a tip or two on trading smarter!
In this blog entry today we are sharing four videos, each a few minutes long. The videos discuss practical tips for trading and sharing our experience with you
1. Using Bollinger Bands as a possible tool for exiting trades
2. One way you can use the Parabolics study ( also known as PSAR) to manage current positions, possibly as a trailing stop
3. Different ways traders can utilize support and resistance levels in their trading.
4. Entering trades on a stop, using “price confirmation”.
5. Utilizing Range Bar charts for shorter term trading as a way to try and filter out some noise.

Good Trading

Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors.  You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time when it comes to Futures Trading.

 

Futures Trading Levels

10-08-2020

72f0c545 aa22 4f8d 9c56 6974a30e30b3

 


Economic Reports, source: 

https://bettertrader.co/ 

edf5a22c 6db7 4838 9b90 6adcd2072483

This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts here in contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgement in trading.

Weekly Newsletter 1069: 25 Strategies for Trading Options + Levels for the Trading Week 10.04.2021

Posted on by Jenny Collins

Cannon Futures Weekly Letter Issue # 1069

Dear Traders,

Like us on FaceBook!
Get Real Time updates and market alerts on Twitter!

 

25 Strategies For Trading Options
Learn about the 25 Proven Strategies for trading options on CME Group Futures for FREE!
If you are currently trading options on futures or are interested in exploring them further, check out our newly updated trading guide, featuring 25 commonly used options strategies, including butterflies, straddles, strangles, backspread and conversions. Each strategy includes an illustration demonstrating the effect of time decay on the total option premium involved in the position.
Options on futures rank among our most versatile risk management tools, and are offered on most of our products. Whether you trade options for purposes of hedging or speculating, you can limit your risk to the amount you paid up-front for the option while maintaining your exposure to beneficial price movements. To learn more about CME Group options, you can also visit our Options page.

Trading 101: Free Course – An Introduction to Crude Oil

Good Trading

Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors.  You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time when it comes to Futures Trading.

 

Futures Trading Levels

10-04.2021

10.04.2021 Support & Resistance Levels

 

Weekly Levels

10.04.2021 Weekly Support & Resistance Levels

 

Reports, First Notice (FN), Last trading (LT) Days for the Week:

https://mrci.com

Date Reports/Expiration Notice Dates

Better Trader Report 10.04.2021

This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts here in contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgement in trading

Weekly Newsletter 1068: Day Trading Mind Traps & Intro to Crude Oil Futures Course & Trading Levels for the Week Ahead 9.27.2021

Posted on by Ilan

Cannon Futures Weekly Letter Issue # 1068

Dear Traders,

Like us on FaceBook!
Get Real Time updates and market alerts on Twitter!

 

Day Trading Mind Traps

“One way our brain helps keep us safe is to protect us from an awareness of our weaknesses. The brain believes that it is better to be falsely confident than recognize the real risks. This protective mechanism tends to work against us in trading.” Kenneth Reid, Ph.D
MINDING THE MIND
The mind can play tricks on us. Intuitive Trading is an attempt to mind read the market, which makes us susceptible to whipsaws. Hindsight Bias causes traders to underestimate the difficulty of trading, while Competency Bias causes us to over-estimate our abilities. These are mental banana peels that set us up for a fall.
INTUITIVE TRADING
Intuitive trading is a natural response to excessive randomness and non-linearity in the market. But making informed guesses is not the same as formulating a rule-based pattern-recognition system that gives a trader a true edge. Without a rule-based plan, intuitive traders expend a great deal of energy mindreading the market, which will not improve your odds of success. In fact, professional traders make a good living exploiting the emotionally-driven behavior of intuitive amateurs.

Watch a recording of a recent webinar held with Bookmap on the topics of:

  • Order Flow
  • Where are the large orders?
  • Heat Map?
  • Tools for day-traders
  • More….
Crude Oil Futures

Trading 101: Free Course – An Introduction to Crude Oil

Good Trading

Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors.  You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time when it comes to Futures Trading.

 

Futures Trading Levels

09-27-2021

Futures Trading Support and Resistance Levels 9.27.2021

 

Weekly Levels

Futures Support and Resistance Levels

 

Trading Signals for commodities

Reports, First Notice (FN), Last trading (LT) Days for the Week:

https://mrci.com

Date Reports/Expiration Notice Dates

Futures Economic Reports

This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts here in contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgement in trading

Micro Bitcoin Futures

Posted on by Ilan

Micro Bitcoin Futures

Cryptocurrency has taken off as an encrypted alternative to real spending money, giving people more options for doing business. Bitcoin is one of the leading cryptocurrencies on the market, especially after it boomed in 2017. Nowadays, many websites accept Bitcoin payments, which has helped the cryptocurrency market grow significantly. Micro Bitcoin futures have also made a significant impact on the futures trading industry. 

Now, many brokers offer futures for Bitcoin and other types of cryptocurrency. It is easier than ever to trade shares of these types of currency, and traders of all experience levels can trade practically anytime and anywhere. 

  • Keep in mind that before you start trading Bitcoin/ Micro Bitcoin and other crypto futures you will need to acknowledge additional risk disclosures on top of the standard futures disclosures.

One of the most convenient ways for traders to get the results from cryptocurrency is by trading micro futures. Recently, the CME Group announced new Micro Bitcoin futures, which have revolutionized futures trading. Now, for 1/10 the cost of the average Bitcoin share, a trader can purchase shares of this new type of future. 

About Our Team

Cannon Trading has the tools traders need to begin trading cryptocurrency futures. We have various platforms that meet all needs, allowing traders to trade what they want when they want them. 

Our experienced brokers are here to help traders of all levels through the process. We specialize in developing innovative platforms that help traders navigate the market.

Whether a trader is part of a professional trading organization or participating in day trading, our brokers can help. We work with clients from various backgrounds, providing everything from multilingual trading services to broker-assisted trading. If a trader is interested in our services, our customer support team of qualified brokers would be happy to help.  

About Micro Bitcoin Futures

Micro Bitcoin Futures and Bitcoin Futures are both offered by CME to traders around the world. These contracts vary in size, depending on whether a client pursues a regular Bitcoin future or a Micro Bitcoin future. 

Micro Bitcoin Futures allow traders to access Bitcoin Futures for a tenth of the cost of a regular Bitcoin future. Both types of contracts make it easy to get into the Bitcoin market, allowing clients to get the most out of their trading process. 

Trading Micro Bitcoin Futures

The CME Group launched Micro Bitcoin Futures in May of 2021 and it has been a successful  contract from the start. With Bitcoin rising in prominence worldwide, it is easy to see why this type of futures contract appears to be here to stay. 

Bitcoin futures trading has been prominent since 2017 when the CME Group introduced it. Micro futures allow traders to speculate and hedge using 1/10th the size of a single coin of this iconic cryptocurrency. With Bitcoin still dominating the cryptocurrency industry, it is easy to see why many traders prefer the Micro futures over the traditional larger Bitcoin futures as the good faith deposit required is 1/10th of that of the standard Bitcoin contract.

While the new Micro Bitcoin Futures provide a value of 1/10 of a Bitcoin, these contracts are 1/50th the good faith deposit required of a traditional Bitcoin contract. This lower margin requirement allows traders to access more futures, giving them greater control of how much they can invest. 

The versatility of the market, along with the lower capital involved, helps more traders access this type of future. It is for this reason that Micro Bitcoin Futures are popular with both active traders and cryptocurrency users. 

Benefits of Micro Bitcoin Futures

There are many benefits involved in trading Micro Bitcoin Futures, which can help traders who have just started participating in the market. 

Micro Bitcoin futures allow traders to take advantage of the many benefits of Bitcoin futures without investing as much. The CME Group saw the need for a minor Bitcoin futures contract, especially since the traditional contract was worth 5 Bitcoin. 

More people could participate in cryptocurrency futures trading by creating this new, minor contract, which helped liquidity.

The institutional volume for Micro Bitcoin Futures has allowed the market to reach over a million contracts in just a short period. While this type of trading launched in the summer of 2021, it has become a popular choice, even seeming to outpace the traditional Bitcoin futures market. 

Here are just a few of the benefits traders can expect when utilizing Micro Bitcoin Futures:
  • Smaller capital investment
  • Reasonable bid offer spreads
  • Lower entry price
  • Regulated financial products
  • More accessible to more traders
  • And more

The team here at Cannon Trading can help traders understand this type future, allowing them to get the most out of their opportunities. We understand that our traders have varying needs, which has led us to develop innovative solutions and platforms to achieve them. 

Our team wants to help people get the most out of their Micro Bitcoin futures, which is why we have a dedicated group of brokers ready to assist our traders. 

We also have platforms for various needs and trading opportunities, from mobile platforms to desktop applications. Our products were designed with traders in mind, giving people the functionality to access the market. 

Impact of Micro Bitcoin Futures

While Micro Bitcoin Futures are relatively new to the market, they have made a significant impact on trading as a whole. This type of contract allows traders to explore the cryptocurrency futures market without spending as much capital as a traditional contract would require or coin in the Cash marketplace.. 

We understand that new traders may have a lot of questions regarding this type of cryptocurrency futures trading venue. There are risks involved in trading futures and even greater risks when trading Bitcoin and MICRO bitcoin futures. Our team is here to help field any questions a person might have regarding the trading process as a whole. Cannon Trading makes it easy to navigate the market, as we provide cutting-edge platforms that simplify the trading process. 

Our brokers have been assisting traders since 1988, which has allowed Cannon Trading to become a leading name in the futures trading business. We opened our online trading service in 1998, which allowed more traders than ever to participate in the market. Over 20 years later, traders have continually recognized us as one of the leading brokerage services. 

How Cannon Trading Can Help Micro Bitcoin Futures Traders  

At Cannon Trading, we have the tools traders need to make informed decisions before investing in the futures market.  

We provide access to cutting-edge software and programs that put our traders at the forefront of the industry.  

Cannon Trading’s experienced brokers can help clients learn more about oil futures, offering insight into the overall market, as well.  

We work with traders from many different backgrounds, including: 
  • Broker-assisted traders 
  • Day traders  
  • Diversified traders 
  • Institutions  
  • Professional traders 
  • And more 

Whether you’re a beginning trader or an experienced one, our brokers can help you navigate the market. We have direct experience with the market so that we can help our clients best navigate the market.  

We also provide them with the tools to make the most of markets and manage risk during volatile times. 

Contact Cannon Trading 

Our professional commodities brokers will work with you to understand your specific trading style and requirements and provide you the essential advice and information you need to thrive in this highly lucrative market. 

As an example, Cannon Trading’s Broker-assisted Trading solution provides traders new to the field with the essential advice and tools they need to accelerate their understanding of some of the mechanisms that affect prices in any futures contract market.  

Contact us today to learn more about commodities trading and information on futures options and other listed commodity contracts. 

Disclaimer 

Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involve a substantial risk of loss and are not suitable for all investors.  

Past performance is not indicative of future results. You should carefully consider whether trading is suitable for you regarding your circumstances, knowledge, and financial resources. 

You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time. 

Weekly Newsletter #1065 Trading Signals Directly to your Inbox and Support and Resistance Levels 9.06.2021

Posted on by Ilan

Cannon Futures Weekly Newsletter Issue # 1065

Dear Traders,

Get Real Time updates and more on our private FB group!

VAREA Signal Trading Alerts

Directly to your Inbox!

  • A dynamic research tool for Futures traders based on revolutionary algorithmic IP. Experienced management team has combined decades of trading experience with superior programming capability to produce this unparalleled algorithmic trading product.
  • Daily email to traders identifying trading opportunities (signals) on more than 20 specific tickers per a discrete set of rules and conditions/algorithms.
  • Packages are signals only (Basic, $99/month) or signals with execution suggestions by VAREA trading specialists (Premium, $199/month) and get a free month of the Premium product when you sign up. Contact your broker for implementation instructions to get you started.
Verea Trading Signals - Example
Verea Trading Signals - Example
Good Trading

Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors.  You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time when it comes to Futures Trading.

 

Futures Trading Levels

9-06-2021

Support and Resistance 9.06.2021

 

Weekly Levels

Weekly Support and Resistance Levels

Reports, First Notice (FN), Last trading (LT) Days for the Week:

https://mrci.com

Date Reports/Expiration Notice Dates

1366790c 6c79 44ae a727 16923048ad43

This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts herein contained are derived from sources believed to be reliable but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgment in trading

Futures Trading Levels for June 30th, 2021

Posted on by Ilan

Cannon Futures Daily Blog

Dear Traders,

Starting June 28, 2021, CME Group has removed the trading halt between 3:15 and 3:30 p.m. CT on CME Globex for Equity Index products.
This enhancement will allow market participants to access liquidity continuously throughout the trading day and manage event risk that occurs during the trading session with greater ease.
Tomorrow is also the last trading day of the month!
Last trading days and first trading days of the months will at times have unique characteristics. Possible larger moves, sharper turns, higher volume.
Large traders/ funds will try to “close the books for the month”, book profits or losses etc.
Do you homework, go over notes from your journal, study the charts from prior last/ first trading days and be prepared.

 

Get Real Time updates and more on our private FB group!
To access a free trial to the ALGOS shown in the chart along with other tools? (Arrows possible buy/sell, diamonds = possible exit/ tighten stops) visit and sign up for a free trial for 21 days with real-time data.

Futures Trading Levels

for June 30th

df0a7a67 2cfb 4889 93d4 b927ff7dff89

Economic Reports, source: 

 www.BetterTrader.co

 

07f8b0f5 835d 47ab a836 a25d85bbc5eb

 

Good Trading

Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors.  You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time when it comes to Futures Trading.

Futures Trading Levels for June 29th, 2021

Posted on by Ilan

Cannon Futures Daily Blog

Dear Traders,

Starting today, June 28, 2021, CME Group has removed the trading halt between 3:15 and 3:30 p.m. CT on CME Globex for Equity Index products.
This enhancement will allow market participants to access liquidity continuously throughout the trading day and manage event risk that occurs during the trading session with greater ease.
Subject to regulatory review and effective June 28, 2021, CME and CBOT will eliminate the 3:15 p.m. – 3:30 p.m. Central Time (CT) trading halt on CME Globex which currently exists for certain Equity futures and options contracts.
The halt was initially implemented to account for transactions conducted via open outcry in the trading pits and is therefore no longer necessary.
June is almost over and just like that next week is 4th of July and the beginning of what we consider “summer trading”…
Summer trading USUALLY = less volume, narrower ranges but also larger moves on certain reports.
Below is a video I put together a few years ago on trading using overbought and oversold conditions – still very valid in m opinion.

 

Like us on FaceBook!
Get Real Time updates and market alerts on Twitter!
Get Real Time updates and more on our private FB group!

To access a free trial to the ALGOS shown in the chart along with other tools? (Arrows possible buy/sell, diamonds = possible exit/ tighten stops) visit and sign up for a free trial for 21 days with real-time data.

Futures Trading Levels

for June 29th

e39bb9f8 6758 446d 9074 94b1bbd9b619
Good Trading

Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors.  You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time when it comes to Futures Trading.

Economic Reports, source: 

 www.BetterTrader.co

5cffa6f6 9af3 42ae a278 a02c076a8219

 

This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts herein contained are derived from sources believed to be reliable but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgment in trading

CME MICROS: Micro Mini Futures Contract

Posted on by Ilan

CME MICROS, more commonly known as Micro E-Mini Futures Contracts, have been trading with great success since they were first introduced by the CME Group in 2019.   In terms of liquidity, for both smaller and newer futures traders, the Micro E-Mini has made futures trading more affordable and  accessible to the independent investor, who may not have large amounts of risk capital to invest.

Standard futures contracts and Mini Futures Contracts are sized to a certain value multiplied by the futures price.  For example a mini contract sells for $50 x the contract price.  The E-mini S&P 500 has a contract size of $50 times the E-Mini futures contract price, which if the contract price is say $1,240, then the contract value is $62,000.

CME states all four of the Micro E-Mini Futures Contracts are 1/10 the size of their respective E-mini futures counterparts – allowing all traders futures exposure without the notional constraints of the larger contracts.  These Micro Minis include the follow contracts:  S&P 500, Nasdaq-100, Russell 2000, and the Dow Jones Industrial Average.

 

What Is a Micro Mini Futures Contract

Micro E-Minis are one-tenth of the size of a traditional E-Mini contract, which allowing for lower margins and requires a significantly lower investment capital than their standard counterparts.

If the S&P 500 index is 2950, the micro e-mini value is 5 times the value of the index or $14,750 versus the value of a  standard e-mini contract, which is 50 times the price, and would set an investor back $147,500.  While the contract value is significantly higher, so is the exposure to market fluctuations.  This is where the benefit of the Micro E-mini comes in.

The Micro E-Mini contract is a significantly smaller contract than the mini or standard futures contract, which can set an investor back several thousand dollars.  The micro E-mini offers a much more affordable way for traders to access the equity index futures markets.

 

How Do Micro E-Mini Futures Contract Work?

While a standard E -mini S&P 500 futures contract has a value of $50 times the contract price – the Micro E-mini S&P 500 futures contract has a value of just $5 times the contract price, making this a much more affordable futures contract vehicle.

Your upward and downward exposure to fluctuations in the market is significantly reduced.

Most traders will use MICROS for short term trading, and can day trade the micros with less than $2,000 in the account.  Both losses and gains are smaller relative to the Mini S&P, but there are still risks associated even if you trade Micro E-Mini Futures.

Open a new trading account here

 

Why Invest in Micro E-Mini Futures

Experienced traders will enjoy the efficiency of the contract, the ability to sell short with ease, and the possibility of benefitting from short- and long-term profit and loss tax rules.  New traders will appreciate more affordable options of Micro E-Mini Futures Contracts, that incur less risk at just $5 times the contract value and have lower margins.

This allows new investors with limited assets to participate in this exciting market with limited exposure to risk, and for a much larger pool of traders.  Cannon is excited to bring in new traders, as well as, offering more diverse and flexible portfolio of futures trading options to new and  current clients.

Contact Cannon Trading here for more details on investing in Micro E-Mini Futures Contracts, or other futures investments.

“The MICROS offer a few advantages for both new and experienced traders”, says Ilan Levy-Mayer, Cannon’s VP. “If one wants to move from demo to live trading, one can start with the MICROS and utilize less capital and ease into the live trading part with smaller contracts. Another advantage is the ability to scale in and scale out and last but not least, longer term trades or maybe swing trades might be better utilized using the smaller MICROS.”

In addition to the micro e-minis, Cannon Trading brokers can also help investors trade MICRO gold.  Learn more here.

Appx Daily & Monthly Volume(December 2020)

Micro E-mini S&P March Contract (MESH21) Daily Volume – 57,180

Micro E-mini S&P March Contract (MESH21) Monthly Volume – 1,143,585

Micro E-mini Nasdaq March Contract (MNQH21) Daily Volume – 227,598

Micro E-mini Nasdaq March Contract (MNQH21) Monthly Volume – 4,551,970

Micro E-mini Dow Jones March Contract (MYMH21) Daily Volume – 50,061

Micro E-mini Dow Jones March Contract (MYMH21) Monthly Volume – 1,001,220

Micro E-mini Russell March Contract (M2KH21) Daily Volume – 34,335

Micro E-mini Russell March Contract (M2KH21) Monthly Volume – 686,700

Micro gold Feb Contract (MGCG21) Daily Volume – 51,118

Micro gold Feb Contract (MGCG21) Monthly Volume – 1,022,350

 

Benefits of the Micro E-Mini Futures Contract

The economical aspect of the Micro E-Mini is perhaps its largest draw. In the S&P a trader traditionally must maintain a minimum margin of $13,000, but with the new Miro E-Mini, that margin may now be as low ae $1,300. With these lower margins, more and more traders will now be able to make investments based on where they think the markets may be headed with Stock index futures contracts. Those who now trade with exchange-traded funds (ETFs) can now more easily expand to the futures market.

Cannon Trading stresses the importance of finding a broker that offers the most up-to-date technology and resources available. They also stress the importance of choosing a firm whose brokers have experience and specialize in an array of market corners, thus making it easier for them to customize their services to every trader’s needs and objectives. “At Cannon Trading we offer an expansive selection of cutting-edge technology, and our brokers are knowledgeable and experienced enough to assist any level of trader with his or her needs”.

FREE, real-time demo, with live prices of ALL MCIROS futures available at:

 

https://www.cannontrading.com/software/e-futures-international

Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors.  You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.

 

COVID-19 Impact on Futures Trading

Posted on by Ilan

Futures Trading

 

The sweep of the coronavirus around the world ranks as one of the most impactful events in decades. Due in large part to sweeping lockdowns of businesses, travel and social activities, global markets, particularly commodity markets, have experienced price disruptions on an unprecedented scale. Recall earlier this year, the front month crude oil futures contract (May) traded at a value below $0.00 per barrel and at the close of trading one day, its price settled at a negative value. Conversely, gold’s December futures contract recently reached an all-time high above $2,000 per ounce. These price moves and similar ones – in silver, copper, stock indexes like the S&P 500, Nasdaq & Dow Jones, lumber and others – can be at least partly attributed to abrupt changes in supply & demand patterns during this international health crisis and its effects on producers’ and consumers’ behavior.

In this environment, the case could be made to review trading strategies and make adjustments – in market selection (think “full-sized” vs. mini- or micro- contracts), risk parameters – both in terms of dollar value and price toleration – market selection/allocation, trade frequency and for automated systems, adjustments to algorithms. All this would be to expect a continuation of the last several months’ market movement/volatility.

As part of a strategy review, it would be a good idea to also be aware of any price limits or circuit breakers in place for the markets you’re trading. A price limit is the maximum price range allowed for a futures contract for a trading session. At those price limits, trading may halt for a period of time and an expanded price limit is set, or it may be stopped for the day. Circuit breakers are price limits that when hit, set a timer within which the market is restricted from moving beyond the price limit. In some markets, price limits and circuit breakers are based on percentage moves from the prior day’s closing price and thus are recalculated each day.

Grains and livestock futures contracts, for example, have daily price limits that remain in place for an entire trading session. Stock indexes have both price limits that remain in place for an entire trading session and several circuit breakers: ones that are in place overnight and others that work only during the day. During high volatility periods of time, if markets trade to circuit breakers or price limits, orders placed during at that time can be rejected by the exchange. In summary, knowing these price parameters is especially important.

For more information on how CME Group price limits and circuit breakers work, visit this link.

For specific CME Group price limits and circuit breakers, visit this link.

During this time, it’s more important than ever to be informed, aware and prepared. One of the best means available to help you is access to an experienced, knowledgeable broker. Not only do they have answers to questions regarding the items discussed above, they can look at your situation specifically and offer strategy guidance as well as educational material and information sources you may have overlooked, couldn’t find, or were unaware even existed. Contact Cannon Trading Company.

COVID-19 Impact on Futures Trading

  • Increased volatility and risk
  • New traders needed to understand limit down/ limit up
  • Wild overnight swings
  • Wild moves both ways
  • MICROS are a valid tool
  • Twitter is now a factor
  • More than ever an experienced broker is an asset

Disclaimer – Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. Past performance is not indicative of future results. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.

 

Hedging Futures Price Risk Through the Futures Market

Posted on by Ilan

Hedging Futures Price Risk Through the Futures Market

Written by John Thorpe, Senior Broker

Would you pay $700.00 for a one way airplane ticket between Chicago and Dallas?  Economy? How about $650.00 one way between Oakland and Seattle in a middle seat?  What if the price of your favorite coffee-chino increased by 50% or even 90%, how much will you be willing to pay to get that same fix? Or would you buy a lesser product? Is it rational we as consumers are forced to change our buying habits due to unexpected price increases?

A jeweler needs to buy resources (platinum, silver, gold, etc.) to make what he is going to sell, even when resources are sparse and costs are high. A farmer may be forced to sell his product when there is an abundance and prices are low. This doesn’t seem fair to the jeweler, who needs his supplies even when their costs skyrocket, or the farmer, who toils through a growing season and takes on the risks of weather, insects, and disease. These prices can fluctuate dramatically on the world market, and yet it is important for sellers to keep their prices a steady as possible to please their customer base. Perhaps where it is most apparent how important these fixed prices are is with your daily cup of coffee. A coffee roaster like Starbucks must try to control the cost of inputs even when the price for raw coffee bean fluctuates, sometimes dramatically, on the world market. If they couldn’t control the cost of the coffee, then you would not be able to depend on your daily $5.00 fix.  Even Airlines are subjected to price variability in the form of costs for jet fuel. As fuel costs rise, the ticket price needs to cover the expense, and a rational increase in the price of a coach ticket should be expected; Budget prices no more. Irrational market price moves for the basic inputs of industry are long and storied throughout human history.

All of the above  hedge price risk, to try to offset some of that price risk. But where do they begin?

Futures markets temper and offset price risk for producers of products, shippers, retailers, and end users. But why is price risk so important to understand, and how can you protect yourself buy hedging or how can you lock in a price for future delivery of goods? You will through the futures market.

What is a Futures Contract?

A futures contract is a contract between two parties where both parties agree to buy and sell a particular standardized asset of specific quantity and at a predetermined price, on a specified date in the future. These legal contractual obligations can be offset at any time prior to contract expiration. A good faith deposit or performance bond equal to approximately 5% of the notional value is required and is called the margin requirement. 

Who trades in the futures markets? 

Well, the farmer, the jeweler, the airlines and Starbucks all do. Large corporations, farm cooperatives, import/export companies and even your next-door neighbor might. These are all entities who could be hedging, so we call them Bona Fide Hedgers. 

There are other participants that we call speculators. These could be banks or individual investors who use the markets as a supplement and compliment to their investment portfolio.

The History of Futures

The History of Futures markets and hedging is long and varied. 

  •  “Many individuals grew suddenly rich. A golden bait hung temptingly out before the people, and, one after the other, they rushed to the tulip marts, like flies around a honey-pot. Every one imagined that the passion for tulips would last forever, and that the wealthy from every part of the world would send to Holland, and pay whatever prices were asked for them. The riches of Europe would be concentrated on the shores of the Zuyder Zee, and poverty banished from the favoured clime of Holland. Nobles, citizens, farmers, mechanics, seamen, footmen, maidservants, even chimney sweeps and old clotheswomen, dabbled in tulips.”                 
    •  Mackay, Charles (1841), Memoirs of Extraordinary Popular Delusions and the Madness of Crowds, London: Richard Bentley

“When Tokugawa Yoshimune became Japan’s shogun in 1716, he sought to reform the state’s finances. Rice played an important role in his reforms, since it accounted for 90 percent of the government’s revenues.  The shogunate also paid the bannermen (an important group of samurai who formed the civil and military administrations) fixed amounts of rice each year to secure their support.a Low rice prices in the late 1720s strained the samurai’s finances, which had already deteriorated significantly over the previous century. Potentially as a result of several good harvests, the price of rice in 1729 was only 40 percent of what it had been in 1721, and samurai incomes had thus dropped sharply.  In fact, since 1710 the nominal income of the bannermen had fallen by nearly 50 percent, and their real income had also decreased significantly, though less so since other prices had dropped as well.”

-Moss, David, Professor at The Harvard Business School, “The Dojima Rice Market and the Origins of Futures Trading” (2010)

 

Simply, from these two examples we can see that the need for price stability of commodity costs drove the creation of futures markets. 

Getting Started in Futures

Currently, hundreds of different Futures contracts are available for hedgers. View some, not all markets used for hedging    

The mechanics of a hedge are varied and a hedging professional can help you with your unique situation. 

People always ask me if they have to take delivery of the product they are hedging and the answer is no. However, you can take delivery of many of the futures contracts if it happens to be suitable for the strategy you are engaged in. Some futures contracts are financially or cash settled. For instance, if you buy a mini crude oil contract at $55.00 per barrel and on expiration day, the contract is priced at $57.50 and your account will be credited with a $2.50  x 500 barrels or $1250.00 per contract. Which brings us to a few hedging examples I would like to share. The first one is a currency hedge utilized buy grain processors between Canada and the U.S.

(The following example is compliments of the CME “Hedging Foreign Exchange Rate Risk with CME FX Futures” 2014)

image1

Capital Press research put this clear example together on how farmers use futures options as price insurance in their hedge.

unnamed

If you would like to know more about hedging or simply how to use the futures markets for price risk mitigation or speculation, please contact a futures Professional at www.cannontrading.com to walk you through the steps to open an account and begin the process of protecting your commerce.

Disclaimer – Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. Past performance is not indicative of future results. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.

 

RISK DISCLOSURE: Past results are not necessarily indicative of future results. The risk of loss in futures trading can be substantial, carefully consider the inherent risks of such an investment in light of your financial condition.