Commodity Trading

Category Archives: Commodity Trading

Investment is a game of money of securing future money by taking a risk today. Trading therefore comes with a list of rules to play by. Commodity trading in particular offers tremendous potential for becoming a completely different asset class.

However, before investing in any kind of commodity, you must do an in depth research and also ask your broker as many questions as possible. Through this category archive we provide you as much information and valuable insights into the world of commodity trading.

We at Cannon Trading are here to help you with your commodity trading needs. You as a trader should select your commodity trading advisor only after performing a due diligence on him/her. We in fact do that for you. This way, you get only the best advice to help you with your commodity trading.

We’ve got the information that you might need at every step of commodity trading, and you’ll find it all right here in the commodity trading section of our blog. Read up, and read on to get equipped!


S&P 500 Futures are almost 40!

January 24th, 2020 Filed under Commodity Trading, Future Trading News, S&P 500 | Comment (0)

SP 500 FuturesDon’t look now, the S&P Futures market is almost 40 years old! Prepare the over the hill jokes. On April 20th 1982, following winning a lawsuit to prevent the opening, regulators at the CFTC and SEC agreed to allow the contract, with the condition that it be settled using cash instead of delivering stocks. This was a revolution to the Commodity Sector, which was founded on delivering physical commodities like Live Cattle, Soy Beans and Silver. The move was expected to begin the merge between the equity and commodity sectors.

On April 21st 1982 at the CME “The Spoos” began trading futures based off the S&P 500 stock market index. Using 500 broad ranged stocks, S&P 500 Futures has since become the gauge for the economy. According to the April 22nd edition of the New York Times, “Indeed, the first trade was executed by a prominent gold trader, Maury A. Kravitz, who said he bought a contract for a client with a substantial stock portfolio. The seller was another floor trader, George I. Segal, who normally trades frozen pork bellies futures. Mr. Segal also said he was trading for a client with a large stock holding.” In the same year Paul Volcker and the Federal Reserve increased interest rates to nearly 20% successfully curbing inflation that kept the market suppressed since the late 1960s highs. The opening price was 116.35 and traded at $500 a point with a 1.5-point range. There were almost 4,000 contracts traded the first day. The notional value was about $58,500 and $3,200 margin.

In September 1997 S&P 500 Futures got its license to drive; opening on the online trading roads called GLOBEX. S&P Futures split in half making it $250 a point (moving to tenths from twentieths) while creating the E-mini (ES) 1/5 size contracts. The E-mini is traded exclusively on GLOBEX in quarter point increments allowing for the first time -traders to place their own trades instead of having to call it down to the floor. In 1998 the market closed over $1,000 for the first time. The volume was about 100,000 per day and the Notional value was $250,000 for the full size and $50,000 ES. The margin was about $5,000 per contract for the ES.

In May 2019 the ES E-mini S&P Futures at 37 years old had offspring of its own when the CME launched Micro Futures on the ES. The Micro ES, symbol MES, is 1/10 the size of the ES and 1/50 the size of the full size and 1/100 of the original contract. The original S&P Futures have all been but phased out with the closing of the physical pit a few years ago. The E-mini (ES)- now becoming known as the new “standard-size” S&P, is trading over price 3,300 making a nominal value of $165,000 per contract. This is 3x the size of the original futures contract’s nominal value while using the contract that was 1/10 of the size, using the $500 per point vs the $50 per point. Comparing apples to apples; the nominal value would have grown from $58,500 to $1,650,000 per contract. The volume is typically between 1 million and 2 million contracts traded per day and the margin is currently $7,290 for the ES contract, with many Brokers offering $500 day margins. If the cycle continues, the MES Micro ES futures will grow in size and who knows might become “standard- size” one day.

Celebrate the evolution by registering for a free Demo below to try the New Micro S&P Futures.

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.


Should I Trade FOREX or Currency Futures?

July 18th, 2019 Filed under Commodity Brokers, Commodity Trading, Currency Futures, Day Trading | Comment (0)

By Matt Kang, Senior Broker

FOREX (foreign exchange market or currency market) refers to an international exchange market where currencies(pairs) are bought and sold. For instance, EUR/USD, GBP/USD, AUD/USD and more. If you are trading forex, you can hold your positions as long as you want because it doesn’t have any expiration date. But there is a cost associated with keeping the position over night, it can either be a credit or debit depending on the interest difference between two countries.

Currency futures are in one currency such as EURO FX or Canadian Dollar. Unlike FOREX, there is an expiration date which means you can only hold the position until that time. For example, if you are trading Mexican Peso and South African Rand but carry the position after the expiration date, these currencies are physically delivered four times in a year on the third Wednesday of March, June, September, and December.

 

Liquidity and Centralized Market?

 

The FOREX market is the largest and most liquid market in the world.  There is no centralized location for FOREX, which means there is no one physical location which is supervising this market. Therefore, traders must check the quotes of various currency pairs from each dealer.

The currency futures market has a respectable daily average closer to $100 billion. Compared to the 4 trillion FOREX daily volume. Currency futures are not as liquid as forex, but sufficient enough to trade. Currency futures are a centralized market, and one key aspect of centralized markets is that all traders and investors are able to see same quotes and the existence of a clearing house, it guarantees the integrity of the transactions. The resulting benefit of reduced risk from not dealing with variable counterparties is a key aspect of this.

 

Cost of Trading and Commission?

 

Some people say “I trade FOREX because there is no exchange, no regulatory fees and no commissions” but it is not true.  If you trade currency futures, you will see all of these fees exist, such as NFA fees, exchange fees and commission fees. It will cost around $5-8 (buy and sell) for a self-directed account. If you are trading FOREX, then all of these fees are included in a bid/ask spread. A typical spread for EUR/USD is 1.2 pips which is equivalent to $12.

 

So Should I Trade FOREX or Currency Futures?

 

 

For the average investor who trades an account of $2,500 to $500,000 it is probably wiser, and more cost effective to trade Currency futures. The cost of trading will be lowest with this amount of funding and the roll-over rate will not dramatically impact your trading.

 

If you are working with very little money ($250 to $2,000) OR trading with more than $1 million OR trading some exotic pairs, then you will be better off with FOREX because it offers mini as well as micro trading sizes. Also, if you are investing over $1 million, then it is possible to earn interest and lower spread (fees).

 

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.

 


Selling Future Options Premium

June 26th, 2019 Filed under Commodity Brokers, Commodity Trading, Day Trading, Economic Trading, Financial Futures, Future Trading News, Future Trading Platform, Futures Broker, Futures Exchange, Futures Trading, Options Trading, Trading Guide | Comment (0)

Futures Options Writing

 

Have you ever wondered who sells the futures options that most people buy? These people are known as the option writers/sellers. Their sole objective is to collect the premium paid by the option buyer. Option writing can also be used for hedging purposes and reducing risk. An option writer has the exact opposite to gain as the option buyer. The writer has unlimited risk and a limited profit potential, which is the premium of the option minus commissions. When writing naked futures options your risk is unlimited, without the use of stops. This is why we recommend exiting positions once a market trades through an area you perceived as strong support or resistance. So why would anyone want to write an option? Here are a few reasons:

  1. Most futures options expire worthless and out of the money. Therefore, the option writer is collecting the premium the option buyer paid.

 

  1. There are three things that happen to the underlying price of the option: Price goes up, goes down or stays the same. If when the option expires, the market price was at or below your strike price you collect all the premium if two of those things happen Time decay is the option writer’s friend.

 

  1. The writer believes the futures contract will not reach a certain strike price by the expiration date of the option. This is known as naked option selling.

 

  • To hedge against a futures position. For example: someone who goes long cocoa at 850 can write a 900 strike price call option with about one month of time until option expiration. This allows you to collect the premium of the call option if cocoa settles below 900, based on option expiration. It also allows you to make a profit on the actual futures contract between 851 and 900. This strategy also lowers your margin on the trade, and should cocoa continue lower to 800, you at least collect some premium on the option you wrote. Risk lies if cocoa continues to decline, because you only collect a certain amount of premium and the futures contract has unlimited risk the lower it goes. So you should trade with a stop on the futures contract. You can read on different strategies using options on futures here:

 

https://www.cannontrading.com/tools/education-futures-options-trading-101

 

Cannon offers SPAN margins for options sellers.

Many brokers will restrict or increase the margins required for options sellers, or traders who like to “collect premium”, but here at Cannon we can find you the best set up utilizing the multiple clearing arrangements we have with more than a few FCMs.

How much margin is required to sell a futures option?

That is a question we get asked often. The exact number is an output of SPAN margins. SPAN deserves a post on its own, but what it stands for is: Standard Portfolio Analysis of Risk. The formula takes into consideration volatility, time value, distance of strike price from current underlying future, and more.

Outright options may be easier to “guesstimate” margin than more complex strategies and spreads, but our free platform, E-Futures Int’l (https://www.cannontrading.com/software/e-futures-international )has a margin calculator built in so you can calculate the margin you will need for different strategies.

Commission for selling options on futures?

Commissions will vary based on the following:

Are you trading online or with a broker?

Trading volume

Account size

Risk responsibility.

The rates for selling options will vary from as low as $0.25 per side + fees for HIGH VOLUME, institutional accounts to $30 per side + fees for retail, broker assisted accounts.

 

Selling options is NOT for newcomers as it involves higher risk than buying options.

However, selling options and trading option spreads may offer an edge if done with proper risk management. No guarantees are made here.

Our strength at Cannon is our ability to offer CUSTOMIZED trading solutions, so contact a broker at:

https://www.cannontrading.com/company/contact

and learn more about risks and opportunities in futures trading (https://www.cannontrading.com/riskopportunity), what software you can use, consult with a broker on margin, commissions and strategy questions and much more!

 

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.


Rollover Notice for Stock Index Futures & Futures Levels 6.13.2019

June 12th, 2019 Filed under Commodity Brokers, Commodity Trading, Day Trading, Futures Broker, Futures Trading, futures trading education, Indices | Comment (0)

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Dear Traders,

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Rollover Notice for Stock Index Futures
Important notice: For those of you trading any stock index futures contracts, i.e., the E-mini S&P, E-mini NASDAQ, E-mini Dow Jones etc., it is extremely important to remember that we are now rolling over and trading the September 2019 contract.
Starting June 13th, the September 2019 futures contracts will be the front month contracts. It is recommended that all new positions be placed in the September 2019 contract as of June 13th.
Volume in the June 2019 contracts will begin to drop off until its expiration on Friday June 21st.
The month code for September is U19
In between, 30 min chart of the mini NASDAQ for your review below, on the short term, market can decline some more if we stay below the 7500 level.

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.

 

Futures Trading Levels

06-13-2019

 


Economic Reports, source: 

bettertrader.co

 

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 Futures Silver Chart & Trading Level 6.07.2019

June 6th, 2019 Filed under Commodity Brokers, Commodity Trading, Day Trading, Futures Broker, Futures Trading, futures trading education | Comment (0)

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Voted #1 Blog and #1 Brokerage Services on TraderPlanet for 2016!!  

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Dear Traders,

Like us on FaceBook!
Get Real Time updates and market alerts on Twitter!
Is the silver market finally waking up?
A look at weekly chart below.
Are you tired of day-trading and getting stopped out?
  1. As a hedge, no need for stops
  2. As a pure speculation. A relatively inexpensive way to speculate on market direction in a time frame that can be for minutes, hours or a few days without the need to use stops.
Briefly, the definition of an option contract from the National Futures Association is: An investment vehicle which gives the option buyer the right—but not the obligation—to buy or sell a particular futures contract at a stated price at the specified expiration date. There are two separate and distinct types of options: calls and puts. These weekly options are European Style, Exercisable to the nearest futures contract at 3pm Central time on Friday. If in the money by any amount, the exercise is automatic.

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.

 

Futures Trading Levels

06-07-2019

 


Economic Reports, source: 

bettertrader.co

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.

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