E Mini Futures Investor Education - The Manifesto

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Back in June I published a Manifesto on the importance of investor education.  As education is the reason for this blog and our main site, http://www.easy-emini.com/ I thought it was worth reposting.

http://easy-emini.blogspot.com/2010/06/investor-power-through-education.html?showComment=1277579458718

Futures trading involves substantial risk and is not suitable for all investors

E Mini Futures Leverage Explained

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One of the key attractions to trading the E Mini version of a stock index, or any other futures for that matter is that you can participate at a smaller level than in the standard or “big” futures contracts. Think of it as trying out craps in Las Vegas by playing at the $1.00 table at Circus Circus instead of the $25 table at the Bellagio. Just as in Las Vegas, the E Mini can get you into trouble just as fast. Certainly, there are many positives when utilizing the smaller cousin to the standard contract, but in my experience on the brokerage side of the business one of the areas that seems to get new E Mini futures traders into trouble most is understanding leverage.

In the futures market, margin refers to the initial deposit or "good faith" made into an account in order to enter into a futures contract. This margin is referred to as good faith because it is this money that is used to debit any day-to-day losses.

When you either buy or sell an E Mini futures (or any other futures contract), the futures exchange will state a minimum amount of money that you must deposit into your account. This original deposit of money is called the initial margin. When your contract is liquidated, you will be refunded the initial margin plus or minus any gains or losses that occur over the span of the futures contract. In other words, the amount in your margin account changes daily as the market fluctuates in relation to your futures contract. The minimum-level margin is determined by the futures exchange and is usually 5% to 10% of the futures contract. These predetermined initial margin amounts are continuously under review: at times of high market volatility, initial margin requirements can be raised.

The initial margin is the minimum amount required to enter into a new futures contract, but the maintenance margin is the lowest amount an account can reach before needing to be replenished. For example, if your margin account drops to a certain level because of a series of daily losses, brokers are required to make a margin call and request that you make an additional deposit into your account to bring the margin back up to the initial amount.

Let's say that you had to deposit an initial margin of $6,000 on a, E Mini S&P 500 contract and the maintenance margin level is $4,000. A series of losses dropped the value of your account to $3,000. This would then prompt the broker to make a margin call to you, requesting a deposit of at least an additional $3,000 to bring the account back up to the initial margin level of $6,000.

Leverage
In the futures market, leverage refers to having control over large cash amounts of commodities with comparatively small levels of capital. In other words, with a relatively small amount of cash, you can enter into a futures contract that is worth much more than you initially have to pay (deposit into your margin account). It is said that in the futures market, more than any other form of investment, price changes are highly leveraged, meaning a small change in a futures price can translate into a huge gain or loss.

Futures positions are highly leveraged because the initial margins that are set by the exchanges are relatively small compared to the cash value of the contracts in question (which is part of the reason why the futures market is useful but also very risky). The smaller the margin in relation to the cash value of the futures contract, the higher the leverage. So for an initial margin of $6,000 for the E Mini S&P 500 contract, you may be able to enter into a long position in a futures contract valued at about $59,000, which would be considered highly leveraged investments.

You already know that the futures market can be extremely risky and, therefore, not for the faint of heart. This should become more obvious once you understand the arithmetic of leverage. Highly leveraged investments can produce two results: great profits or greater losses.

As a result of leverage, if the price of the futures contract moves up even slightly, the profit gain will be large in comparison to the initial margin. However, if the price just inches downwards, that same high leverage will yield huge losses in comparison to the initial margin deposit. For example, say that in anticipation of a rise in stock prices across the board, you buy an E Mini futures contract with a margin deposit of $6,000, for an index currently standing at $1182. The value of the contract is worth $50 times the index (e.g. $50 x 1182 = $59,100), meaning that for every point gain or loss, $50 will be gained or lost.

If after a couple of months, the index realized a gain of 5%, this would mean the index gained 59 points to stand at 1241. In terms of money, this would mean that you as an investor earned a profit of $2,950 (59 points x $50) before any commission costs.

On the other hand, if the index declined 5%, it would result in a monetary loss of $2,950 plus commissions - a huge amount compared to the initial margin deposit made to obtain the contract. This means you still have to pay $2,950 plus commissions out of your pocket to cover your losses. The fact that a small change of 5% to the index could result in such a large profit or loss to the investor (sometimes even more than the initial investment made) is the risky arithmetic of leverage. Consequently, while the value of a commodity or a financial instrument may not exhibit very much price volatility, the same percentage gains and losses are much more dramatic in futures contracts due to low margins and high leverage.

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Futures trading involves substantial risk and is not suitable for all investors

E Mini Russell 2000 Futures FAQ

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Much attention and trading volume is garnered by the S&P 500 futures and the E Mini version of that contract. While it is an excellent market to trade, have you thought of trading the E Mini Russell 2000 futures instead?

About E-mini Russell 2000 Futures

Designed to track the Russell 2000 Index, the E Mini Russell 2000 futures, this index measures the performance of the 2000 smallest companies in the Russell 3000 Index. This index was designed to be a representative of the investable U.S. small-capitalization equity market. The Index is value-weighted and includes only common stocks belonging to corporations domiciled in the U.S. and its territories. The Russell 2000 Index serves three main purposes: it acts as a performance standard for active managers, it serves as a proxy for asset allocation purposes, and it becomes a purchasable and replicable vehicle for passive investment strategy.
Since its inception, the Russell 2000 Index has become the premier measure of small-capitalization stocks and is widely followed by U.S. fund managers. The Chicago Mercantile Exchange's 1993 introduction of Russell 2000 futures and options gave investors the opportunity to manage small-cap portfolio risk, as well as to gain exposure to this market segment.

CME E-mini Russell 2000 Futures Specifications
E-mini Russell 2000 futures, Intercontinental Exchange (ICE), symbol TF. Contract size is $100 x the Russell 2000 Index. Minimum tick is 0.10 = $10.00.
E-mini Russell futures trade nearly 24 hours per day on the ICE, from 8:00 PM US EST all the way until 6:00 PM US EST the following afternoon.
E-mini Russell 2000 futures trade on a quarterly cycle. Trading months include March, June, September, and December.

Free E Mini Russell 2000 Futures Charts and Quotes
www.Barchart.com does an excellent job of providing charts and quotes: http://www.barchart.com/quotes/futures/RJ*0
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Futures trading involves substantial risk and is not suitable for all investors

What are Automated Futures Trading Strategies?

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Did you know that you can use a fully automated strategy to trade the E Mini and other futures markets?  Algorythmic (Algo) or Black Box Trading is not just for the pro's on Wall Street.  If you are looking for guidance in the way you trade the E Mini or other futures you may want to check out this style of trading in which a computer model makes the decisions for you.  Keep in mind that all the same risk warnings apply but you may want to check this out.  Check out this short video which explains what exactly is an Automated Futures Trading Strategy.

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Futures trading involves substantial risk and is not suitable for all investors.

Gold Futures Prices and Charts

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Now that Goldman Sachs has updated their projection for gold to go to over $1,600 per ounce, I thought it would be timely to share a great link to the CME Group's web page that offers an excellent package of free market data on gold futures.  Charts, prices (10 minutes delayed), volume, contract specifications, and performance bonds/margins are all contained on this clean and easy-to-use page:

http://www.cmegroup.com/trading/metals/precious/gold.html

Please visit our E Mini Futures Day Trading Course web site at:  http://www.easy-emini.com/

Futures trading involves substantial risk and is not suitable for all investors.

Futures Order Types and Tutorial

Please visit our E Mini futures day trading course web site at: http://www.easy-emini.com/

The CME Group has assembled an excellent guide for futures order placement that I believe will be or help, especially if you are new to E Mini and other futures markets. While this is not inclusive of all types of orders, it is a good start for the basics.

2.1 Futures and Options Order Types

The following order types are supported by CME Globex for both futures and options:

• Limit Orders

• Market-limit Orders

• Market Orders with Protection



2.1.1 Limit Orders

Limit orders allow the buyer to define the maximum purchase price for buying an instrument and the seller

to define the minimum sale price for selling an instrument.

Any portion of the order that can be matched is immediately executed. Limit orders submitted for buying an

instrument are executed at or below the limit price. Limit orders submitted for selling an instrument are executed

at or above the limit price. A limit order remains on the book until the order is either executed, cancelled,

or expires.



2.1.2 Market-limit Orders

Market-limit orders are executed at the best price available in the market. If the market-limit order can only

be partially filled, the order becomes a limit order and the remaining quantity remains on the order book at

the specified limit price.

Example: Market-limit Order (Bid)

1. The client sends a New Order to CME Globex.

- Bid, ESZ8, Market-Limit.

2. CME Globex responds with an Execution Report - Order Confirmation.

3. The market-limit order becomes a limit order at the best available market price (90025).



Order Types Futures Options

Limit X X

Market Orders with Protection X X

Market-limit X X

Stop-limit X

Stop Orders with Protection X

Hidden Quantity X X

Minimum Quantity X X

Orders

Electronic Trading Concepts Version 1.8 Page 7

4. CME Globex sends an Execution Report - Partial Fill.

- 2-Lot @ 90025

5. The remaining quantity rests on the book at 90025.



2.1.3 Market Orders with Protection

Market orders with protection are intended to avoid cascading market orders being filled at extreme prices.

Market orders with protection are filled within a pre-defined range of prices referred to as the protected

range. For bid orders, protection points are added to the current best offer price to calculate the protection

price limit. For offer orders, protection points are subtracted from the current best bid price.

CME Globex matches the order at the best available price level without exceeding the protection price

limit. If the entire order cannot be filled within the protected range immediately, the unfilled quantity

remains in the order book as a limit order at the limit of the protected range. Refer to www.cme.com/files/

PriceBanding.pdf for a list of the "no bust" ranges for products.



2.1.3.1 Example: Market Order with Protection Bid

The following example illustrates how the client interacts with CME Globex to process a market order with

protection bid.

1. The client sends a Market Order to CME Globex.

- Bid, ESZ8, Market Order.

- Best Offer = 90025 and Protection Points = 600.

- Protection Price Limit = 90025 + 600 = 90625.

2. CME Globex sends an Execution Report - Partial Fill.

2-Lot @ 90025

3. CME Globex sends an Execution Report - Partial Fill.

3-Lot @ 90300

4. CME Globex sends an Execution Report - Partial Fill.

3-Lot @ 90550

5. Next Best Offer = 90675. This value exceeds the protection price limit. CME Globex places the remaining

quantity on the order book at a protection price limit of 90625.



2.1.3.2 Example: Market Order with Protection Offer

The following example illustrates how the client interacts with CME Globex to process a market order with

protection offer.

1. The client sends a Market Order to CME Globex.

- Offer, ESZ8, Market Order.

- Best Bid = 90000 and Protection Points = 600

- Protection Price Limit = 90000 - 600 = 89400

2. CME Globex sends an Execution Report - Partial Fill.

Orders

Electronic Trading Concepts Version 1.8 Page 8

2-Lot @ 90000

3. CME sends an Execution Report - Partial Fill.

3-Lot @ 89900

4. CME Globex sends an Execution Report - Partial Fill.

3-Lot @ 89650

5. Next Best Bid = 89300. This value is below the protection price limit. CME Globex places the remaining

quantity on the order book at a protection price limit of 89400.



2.2 Futures Order Types

The following order types are supported by CME Globex for futures only:

• Stop-limit Orders

• Stop Orders with Protection



2.2.1 Stop-limit Orders

Stop-limit orders are activated when an order's trigger price is traded in the market. For a bid order, the

trigger price must be higher than the last traded price. For a sell order, the trigger price must be lower than

the last traded price. After the trigger price is traded in the market, the order enters the order book as a

limit order at the order limit price. The limit price is the highest/lowest price at which the stop order can be

filled. The order can be filled at all price levels between the trigger price and the limit price. If any quantity

remains unfilled, it remains on the order book as a limit order at the limit price.



2.2.2 Stop Orders with Protection

Stop orders with protection are intended to avoid cascading stop orders being filled at extreme prices. A

stop order with protection is activated when the market trades at the stop trigger price and can only be executed

within the protection range limits. The order enters the order book as a limit order with the protection

price limit equal to the trigger price plus or minus the pre-defined protection point range.

Protection point ranges are equal to 50% of the product's "no bust” range. Refer to www.cme.com/files/PriceBanding.

pdf for a list of the "no bust" ranges for products. For bid orders, protection points are added to

the trigger price to calculate the protection price limit. For offer orders, protection points are subtracted

from the trigger price.

CME Globex matches the order at all price levels between the trigger price and the protection price limit. If

the order is not completely filled, the remaining quantity is placed in the order book at the protection price

limit. Refer to “Stop Spike Logic” on Page 11 for more information.



2.2.2.1 Example: Stop Order with Protection Bid

The following example illustrates how the client interacts with CME Globex to process a stop order with

protection bid.

1. The client sends a Market Order to CME Globex.

• Bid, ESZ8, Stop Order, 90000 Trigger Price

2. A trade occurs at the trigger price of 90000. The order is activated and CME Globex responds with an

Execution Report - Order Confirmation (Notification that order was triggered).

Orders

Electronic Trading Concepts Version 1.8 Page 9

• Trigger Price = 90000, Protection Points = 600

• Protection Price Limit = 90000 + 600 = 90600

3. CME Globex sends an Execution Report - Partial Fill.

2-Lot @ 90025

4. CME Globex sends an Execution Report - Partial Fill.

3-Lot @ 90300

5. CME Globex sends an Execution Report - Partial Fill.

3-Lot @ 90550

6. Next Best Offer = 90675. This value exceeds the protection price limit. CME Globex places the remaining

quantity on the order book at a protection price limit of 90600.



2.2.2.2 Example: Stop Order with Protection Offer

The following example illustrates how the client interacts with CME Globex to process a stop order with

protection offer.

1. The client sends a New Order to CME Globex.

• Offer, ESZ8, Stop Order (with protection), 90025 Trigger Price

2. CME Globex responds with an Execution Report - Order Confirmation.

3. A trade occurs at the trigger price of 90025. The client's order is activated and CME Globex responds

with an Execution Report - Order Confirmation (Notification that order was triggered).

• Trigger Price = 90025, Protection Points = 600

• Protection Price Limit = 90025 - 600 = 89425

4. CME Globex sends an Execution Report - Partial Fill.

2-Lot @ 90000

5. CME Globex sends an Execution Report - Partial Fill.

3-Lot @ 89900

6. CME Globex sends an Execution Report - Partial Fill.

3-Lot @ 89650

7. Next Best Bid = 89300. This value is below the protection price limit. CME Globex places the remaining

quantity on the order book at a protection price

Please visit our E Mini futures day trading course web site at: http://www.easy-emini.com/

Futures trading involves substantial risk and is not suitable for all investors

Should you be Investing Like the Super-Rich and Buy Gold Now?

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Coming up with your investing plan is challenging for all of us. Do we follow an analyst, the talking heads on CNBC, or the trail of people that publish every move of Warren Buffett? Granted, we should be doing our own research and if you are reading this, you are probably already on that path. What about checking out what the super-rich are up to?

An interesting article published by Reuters on October 4, 2010 highlighted the fact that some of the world’s wealthiest are responding to the current economic crisis by buying gold. And not just buying some gold, they point out that some are literally buying it by the ton. For the story, Reuters interviewed UBS executive Josef Stadler who runs the Swiss bank’s services for clients with over $50 million to invest. UBS is recommending top-tier clients hold 7-10 percent of their assets in precious metals like gold.

“we had a clear example of a couple buying over a ton of gold…and carrying it to another place.” Stadler said. At today’s prices, that shipment would be worth over $42 million.

So, is it time to follow the super-rich and get into gold? We assembled a few posts from our blog to help you:



FAQ – Gold Futures           http://easy-emini.blogspot.com/2010/08/faq-gold-futures.html

Gold Futures Versus Leveraged Metals           http://easy-emini.blogspot.com/2010/06/gold-futures-versus-leveraged-metals.html

Gold Futures Versus ETF’s           http://easy-emini.blogspot.com/2010/05/gold-futures-vs-gold-etfs.html



Futures trading involves substantial risk and is not suitable for all investors

Please visit our E Mini futures day trading course site at http://www.easy-emini.com/

Incredible Site for Graphically Based Futures Quotes and Charts

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Are you looking for a cool, free, and easy way to get E Mini (E Mini FAQ)and other futures quotes and charts on the web? You should check out: http://www.finviz.com/futures.ashx                                                       

I myself am visual based. I want to be able to view many markets and at a glance see what sectors or markets are up or down. This site does that for you. With a bit of a periodic table look you can view nearly fifty markets and by color, know when are up or down for the day. Want to see a chart? You can either mouse over the market or to see the charts of all the tracked markets on one page, there is a tab at the top which allows for that view. There is also a “Performance” tab which displays all the markets as a vertical bar chart and then gives you the option of viewing different time windows such as daily, weekly, etc.



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Futures trading involves substantial risk and is not suitable for all investors.

Three Futures Markets you Should Look at Now

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Futures investing is typically dominated by markets such as the stock indexes, bonds and gold. Did you know there are markets that are reaching prices not seen since 1995? The three markets are Sugar, Coffee, and Cotton. These aren’t even on your list are they? Honestly, I had to do a little work just to add these symbols to my order screen so I know the feeling. Are they worth a look? I think so. If the lifeblood of investing is volatility and the ability of a market to put in a sustained trend, up or down for a material length of time, in my opinion these three fit the bill.



Let’s take a look at the charts for these markets:

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Futures trading involves substantial risk and is not suitable for all investors

Mobile E-Mini Quotes & Trading IPhone and IPad App: A Product Review

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I just completed my two-week trial of the new Tap & ; Trade futures trading app for the IPhone and IPad and am left wondering how we all got by before this marvelous invention. Yes, the IPhone in and of itself is the cool tool, but when it comes to doing real heavy lifting, the Tap & Trade app turns a toy into an E Mini (E Mini FAQ) and other futures trading machine.

I won’t bore you with all the technology details. My job today is to share my experience through my non-techy eyes. If you want all the product specs I invite you to go to their web site: http://www.tapandtrade.com/.

First off, it is completely simple to set up and get going. Especially when compared to PC-based, software driven trading applications this literally took minutes. Not only was I up and going in just a couple of minutes, the entire experience was done with no manuals, lengthy instructions or coaching from a customer service representative. Just as the IPhone is intuitive, so is Tap & Trade. Once you input your user name and password (this must be done every time you begin) you are brought to a simple screen with market groups to spin through. Click on one of the futures market groups or a custom group to see last price, settle and up and down arrows.

To get a more in-depth view of a particular market or place a trade, simply tap it and a much more detailed screen appears. Last price, bid/offer information and simple buy and sell buttons are at the top of the screen. In addition, depth of market and last traded pricing is also displayed. The charts are nice and clear. While perhaps not the most detailed, the charts get the job done.

In short, this app allows you to monitor virtually every futures market and place a trade, fast. In addition, it comes with a desk-top version that automatically synchs with your IPhone so that you can go back and forth between the two seamlessly.

What does this kind of cool cost? To get a quote only version is $250 per month and adding trade connectivity brings it up to $500 per month. Perhaps not for everybody, but if you are away from your trading desk and want either quotes or trading delivered simply and elegantly, than you should give this a spin.

Please visit our E Mini futures day trading course at: http://www.easy-emini.com/

Futures trading involves substantial risk and is not suitable for all investors.

Futures Margin Rates

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A frequent question among our clients is: What is margin all about and what is the margin for a particular contract?

I am pleased to say that the CME Group web site has provided a couple of excellent resources that helps to answer margin, or performance bond questions.

How Performance Bonds/Margins Work: http://http//www.cmegroup.com/clearing/cme-clearing-overview/performance-bonds.html

Performance Bond/Margin Rates: http://http//www.cmegroup.com/wrappedpages/clearing/pbrates/performancebond.html

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Futures trading involves substantial risk and is not suitable for all investors

Should you Invest in an E mini Futures Trading Course?

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Perhaps you have been trading for a while and have wanted to take your trading to the next level. Perhaps this is due to the fact that your E Mini futures (E Mini FAQ) trading has migrated to a low level and you wish to bring it up. Either way, if you find yourself in a place to want to build upon your knowledge base then maybe purchasing a trading course is for you.
There are some things to consider when going down this path. First, you have options when it comes to furthering your education. While not an exhaustive list, here are some things to think about:

Online or In Person? Being the provider of an online course (http://www.easy-emini.com/) I am a bit biased but it is important to know what is available. Obviously, distance plays a huge role in your decision making process but also important is that you understand how you learn. Do you learn better by reading on your own or is a classroom setting? My opinion is that people tend to focus on the course itself and not how it is delivered.

Individual or Group? When it comes to the in person type of E Mini trading courses some courses provide for one-on-one instruction. This is usually referred to as trade coaching. Like any other type of lessons, the private version is usually much more expensive but if you have the means this could be the best route to get you to where you want to go. Consider only getting the attention of the instructor a portion of the time.

Broad or Sharply Defined Course? Make sure to ask for a complete course syllabus and description before putting your money down. Make sure the course is going to cover exactly what you want. In the end, two very precious things are at stake: You time and your money! Think how many times you have taken a class, or sat through some presentation and came away with little more than what you came in through the door with?

Education, in E Mini futures trading or anything else is a very personal thing. Be honest with yourself and clearly define what it is you are looking for. What do you want to get out of furthering your education? You need to successfully sift through the marketing literature about a course and determine if it is exactly what you need.

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Futures trading involves substantial risk and is not suitable for all investors

Want to Get Mobile E-Mini Quotes & Trade Futures from your IPhone or Blackberry

Please visit our E Mini Futures Day Trading Course at http://www.easy-emini.com/

The purpose of this blog is to provide investor education to those interested in the E Mini futures markets. To deliver the best content we can, we look to our members, visitors, and purchases of our E Mini Futures Day Trading Courses over at http://www.easy-emini.com/for ideas. To that end, we have develped a simple, one-question poll you can see to the right which asks the question: Do you want to be able to Trade Futures from your IPhone or Blackberry?

Let us know! Thanks for your help!

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Futures trading involves substantial risk and is not suitable for all investors.

Crude Oil Futures FAQ

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Did you know that you can trade a mini crude oil futures contract? Before you put down you money, check out the facts:

Oil Futures FAQ
Oil Futures FAQ

Futures contracts including trading in crude oil futures are financial instruments and carry with them legally binding obligations. Buyer and seller have the obligation to take or make delivery of an underlying instrument at a specified settlement date in the future. Oil futures are part of the derivatives family of financial products as their value ‘derives’ from the underlying instrument. These contracts are standardised in terms of quality, quantity and settlement dates.

About NYMEX, ICE and WTI

There are futures markets for a number of instruments ranging across currencies, bonds, equities, interest rates and commodities. In the case of crude oil, the main futures exchanges are the New York Mercantile Exchange (NYMEX) and the Intercontinental Exchange (ICE) where West Texas Intermediate (WTI) and North Sea Brent crude oil are traded respectively.

These exchanges trade what is referred to as ‘light- sweet’ crude oil and a single contract, or ‘lot’, calls for the purchase or sale of 1,000 barrels of oil. Traders can buy and sell oil for delivery several months or years ahead.

The bulk of activity in commodity futures markets is typically concentrated on oil for delivery in the next three months. However, in the past five years, activity has increased substantially for deliveries much further into the future as more investors put money into commodity indices.

How Are Oil Futures Traded?

Futures contracts are traded on regulated futures exchanges. Trading can take place through electronic dealing systems, open outcry around a pit or a combination of both. To trade on an exchange, you need to be a member of that exchange. Exchange members can trade on their own account or they can execute orders for hedgers or speculators.

In the latter case, exchange members are acting as brokers and will collect a fee for their service. Each futures exchange has a clearing house which ensures that trades are settled in accordance with market rules and that guarantees the performance of the contracts traded.

The Role of Clearing Houses

The NYMEX operates its own clearing house. In the UK, the London Clearing House (LCH.Clearnet) is a recognised house that clears business for many different exchanges. The ICE exchange as well is recognised as a clearing house by the UK regulator, the Financial Services Authority (FSA).

In the US, the equivalent government regulator is the Commodity Futures Trading Commission (CFTC). When a buyer and a seller agree to trade on futures exchanges, their transaction is recorded and the clearing house then steps in between them, in effect breaking the ‘bond’ between the buyer and the seller to become counterparty to both sides – the process of creating a trade in the name of the clearing house to each of the parties is often referred to as ‘novation’.

The clearing house, among other roles, is responsible for the management of the risk on transactions on the exchange – it establishes margin levels, default rules and ensures the settling of individual positions.

When market participants buy futures, they do not pay the full amount of value of the contracts they purchase. Rather, they pay an initial margin that acts like an insurance deposit (the amount is determined by the clearing house).

This initial margin represents a percentage of the value of the transaction. At the end of each trading day, individual positions are evaluated relative to the closing price of the market published by the exchange – participants are then said to be ‘marked to market’.

If their position is profitable, that profit will accrue into their account. In contrast, if the position is not profitable, the loss will be deducted from the initial deposit and the participant will be given a ‘margin call’ (called the variation or maintenance margin) to make up the difference.

On the settlement date or the expiry of futures contract, the buyer and seller have the obligation to make or take delivery of the instrument. In the case of oil, settlement can be carried out in two ways: through the actual delivery of oil into a predefined location or through a cash settlement.

In the case of the NYMEX WTI contract, physical delivery is possible and entails delivery into the oil hub of Cushing, Oklahoma. On the ICE Brent contract, there is no physical delivery but a cash settlement is available – the value of the position is assessed relative to the settlement price and a correponding financial payment is made.

In reality, very rarely does physical delivery take place in commodity futures. At the same time, market participants do not necessarily need to wait for the expiry of their contract to settle their obligation vis-à-vis the exchange.

Positions are often closed by taking an offsetting position for an equal and opposite amount of contracts. For example, a buyer of a certain futures can therefore sell an equal amount of that futures, making their net obligation relative to the exchange zero.

Crude Oil Futures Definition

The world’s most actively traded commodity based on crude oil, which is unrefined oil that is a popular source of energy and energy-related products. Contracts on many different types of oil are traded on exchanges throughout the world. In the United States, the New York Mercantile Exchange (NYMEX) is the major trading exchange for crude oil futures contracts. In the United Kingdom, the major trading venue is the International Petroleum Exchange.

Light sweet crude oil is preferred by refiners because of its ability to yield high levels of gasoline, diesel fuel, heating oil, and jet fuel. Other trading exchanges throughout the world also trade futures and options on many different varieties of crude oil. The benchmark light, sweet crude oil contract that NYMEX bases its contract on is the West Texas Intermediate (WTI) crude oil that is delivered in Midland,

Texas. Cash prices for WTI are quoted at Cushing, Oklahoma, which is a major crude oil shipment point that has extensive pipeline connections to oil producing areas and Southwest and Gulf Coast-based refining centers.

Please visit our E Mini Futures Day Trading Course site at: www.Easy-Emini.com

Futures trading involves substantial risk and is not suitable for all investors

Is Walmart the Barometer for the Economy?

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I read an interesting article by Greg Farrell in New York and James Politi in Washington on www.FT.com about the divergence of success between luxury retailers like Tiffany’s and Neiman Marcus and mass-market retailers like WalMart and Zales.

The high-end retailers are seeing an upsurge in growth and revenue at a time when the mass-market stores are headed in the opposite direction. For example, according to the article “On Friday, Tiffany, the luxury jeweler retailer, reported a 9 per cent increase in sales for the second quarter of 2010 over the comparable period a year ago.

By contrast, Zale’s, a mass- market chain of jewelry stores, has seen its 2010 sales lag behind its comparable figures for 2009.
Neiman Marcus, the luxury department store chain, reported a 7.6 per cent jump in revenues for the quarter ended July 31. Earlier this month, Walmart reported that same-store sales for the second-quarter of 2010 had declined from the previous year’s levels.”

What are we to come away with from this data? In my opinion, I think this is a negative indicator for the coming near-term economic climate. Most likely, these figures are tied to the woeful unemployment picture. Even the vaunted Walmart is hurting? The economy will be lead higher by the middle of the country. Call it Main Street. Until that sector of the population is out spending again with dollars earned from a job (not a government program) the economy is going to continue to be mired in this ditch. The rich will still buy diamonds in a good economy and apparently buy them when it is bad. The bottom line is not focus on the health of the lower end of the socio-economic spectrum for the barometer, not the top.

Please visit our E Mini futures day trading course web site at: www.Easy-Emini.com

Futures trading involves substantial risk and is not suitable for all investors

E Mini Futures How-To: Using Moving Averages

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Our "How-to" for the day involves applying a simple moving average to an E Mini futures (E Mini FAQ) chart to help give us some clues as to what the direction the market might be heading. In my video below I used a five-minute chart and applied both a 14 and 50 period exponential moving average. While it takes some trial and error to find the right combination for your style of trading I believe that this is one of the simplist ways to determine which direction the market is headed. As with all trading and indicators, there is no gaurantee.



Futures trading involves substantial risk and is not suitable for all investors

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Best IPhone App for Futures Traders

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I have surveyed the landscape of IPhone and IPad apps for futures traders and in my opinion; the one that comes to the top is Tap & Trade. There are other clever App’s out there but most revolve around tracking your portfolio or track various markets or exchanges. Still others provide for quotes (The CME Group has an excellent one) both real time and delayed. All of that is great, but what if you actually wanted to do all of that and trade futures? Tap & Trade lets you do that on a very intuitive and elegant platform.

Designed for professional traders, brokers, and FCM’s this platform is at the high end of sophistication and will probably not suit a novice.
From the Tap&Trade web site, here is the detailed look at what they can bring to your trading:

Real-time Commodity Trading and Risk Management on your IPhone and iPod touch.
Tap and Trade is the first IPhone and iPod touch application designed specifically for Professional Commodity Traders, Risk Managers, FCMs and Brokers.

Tap and Trade is an integrated, fully functional application with a single entry design that is extremely user-friendly and intuitive. You can Tap and Trade exchange-traded futures and OTC contracts including global crude oil, refined products, natural gas, coal, agriculture, foreign exchange/financials, metals, and other related marketplaces. For a complimentary desktop solution, you can try our powerful flagship product suite, exchange tools.

With Tap & Trade you can trade:
• Agriculture
• Crude Oil Futures
• Energy
• FX/Financials
• Gasoil Futures
• Heat & Gas Futures
• Indexes
• Metals
• Natural Gas Futures
• OTC Markets
• and more…

With our innovative suite of products, renowned technology expertise, fast delivery, and straight through processing experience, we give you the ability to trade when you want to and wherever you are. We give commodity trading professionals the assurance in their market decisions and a real-time advantage in creating trading opportunities.

Tap and Trade Summary of Functionality
• Trade Futures Contracts across Multiple Exchanges, including the ICE, CME, NYMEX, DME, and more.
• Powerful Risk Management and Credit Controls with real-time alerts including Quantity Limits, Commodity Restrictions, Per Commodity Daily Long & Short Position Limits, Daily Risk Assessment Value (RAV) Limits, and more.
• Trade OTC Contracts including full support for bilateral orders and Cleared OTC orders.
• Real-time trader summary reports of open orders and completed trades.
• Quick and simple set-up of custom trading screens for easy viewing of multiple trading strategies and commodities.
• Full Depth of Market Display along with Completed Trades and Volumes.
• Full Implieds Functionality including support for Implied orders on the ICE and CME Exchanges.
• View Multiple Commodities Simultaneously from the same screen including Energy, Agriculture, FX/Financials, Indexes, Metals, and more.
• Straight Through Processing of concluded trades directly into user’s front-middle-back office trading systems as well as dumps to Excel.

You can check out a demo on their site as well at www.tapandtrade.com.

Please visit our E Mini futures trading course web site at www.Easy-Emini.com

Futures trading involves substantial risk and is not suitable for all investors

E Mini Grain Futures

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When anyone refers to E Mini trading (E Mini FAQ), the first thing that springs to mind is smaller sized cousin to the big S&P500 or other stock index futures contract. Did you know that you can trade small grain futures contracts? With the Russian wheat crop withering under a brutal drought, wheat futures are attracting a lot of attention. The Chicago Board of Trade offers mini (1/5 sized) contracts of wheat, soybeans and corn futures. All the same potential advantages of trading mini stock index contacts come into play. Versatility, ability to scale in and out of larger positions, and for those new to grain trading, the ability to dip your toe in the water without committing to a larger size contract.

Want to learn more, check out the CME Group’s site here: http://www.cmegroup.com/

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Futures trading involves substantial risk and is not suitable for all investors

Futures Trading Tip – Taking your Winnings Home

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Do you plan to win? Do you have a plan when you win? I understand how many, if not all traders have “the dream” of what to do with untold fortunes derived from trading E-Mini futures or any other investment vehicle. The Ferrari, the Aspen vacation house, the Rolex all come to mind, but what I am referring to is ideally a written plan should their futures trading produce a 10%, 20% or more return in a reasonable time.

Futures investors must have a downside plan but in my opinion most don’t know what to do when all their hard work, research and a pinch of luck get them into the black. Typically, they merely increase their trading or worse, change the way they trade! What if they set an alarm so that when their account grew to a certain realistic level, they took that money home and maybe diversified into another investment or perhaps applied it to some debt?

I think it is important to write this plan out. It can be a heady time when winnings roll in, if they do at all. If you don’t have a written plan I believe it is easy to be cavalier about the increasing fortunes in your E-Mini futures trading account and squander the hard earned profits.

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Futures trading involves substantial risk and is not suitable for all investors

Mobile E-Mini Futures Quotes

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www.Easy-Emini.com

Want to get E-Mini (E Mini FAQ) and out futures quotes on your Smart Phone, PDA, Blackberry, or IPhone? In response to our client’s inquiries I surveyed the marketplace and found a service from Barchart.com to be one of the best. This completely free service (for delayed quotes) allows you to access futures, stocks, and forex with charts, quotes, and much more.
Here is the link to check this out for yourself: http://www.barchart.com/mobile/info.php

Please visit the Easy-Emini.com web site to learn more about the Easy Emini Futures Day Trading Course
www.Easy-Emini.com

Futures trading involves substantial risk and is not suitable for all investors.

Our Easy-Emini Futures Blog going Live on Technorati

We will soon be live with E Mini education (E Mini FAQ)on Technorati! 

More soon!

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What Economic Recovery?

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Friday will bring in yet another Jobless Claims report and the ensuing rise or fall in the E Mini futures, stock market, et al. It appears as if the market is gearing for a negative report as stocks have been declining ahead of the report.

Pundits, writers, and analysts constantly put forth the notion that “investors are jittery as they look to determine if the economic recovery will be sustained.” The eternal optimism is great, but what about reality. My personal opinion is that if we simply look to unemployment as a barometer then we are in for more bad times before it gets better. I am not an economist, not am I a quant master. What I am is a business person who knows a good amount of other business professionals. Why does this matter? I follow my own index. Let’s call it the Scot Index. In the Scot Index, I evaluate the level of unemployment of college educated professional people in my circle of friends and business associates. Right now my Index is very near its lifetime high mark. Out of my closest circle of about fifty professionals/friends, I know of eight that are out of work. Some of these people have been out of work for over a year.

Is this a recovery? While you could make a case for being at the bottom and “we can only go up from here” mentality, I personally can’t embrace that thinking. I think we have more bad times ahead until the Scot Index vastly improves.

What can you do if the Scot Index is at low ebb? Focus on investing methods that can flourish in both up and down markets as opposed to trying to buy stocks or that are cheap, hoping for a recovery.

Please visit our site and learn about the Easy Emini Futures Day Trading Course at www.Easy-Emini.com

Futures trading involves substantial risk and is not suitable for all investors

Top E Mini Futures Blog Posts

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As our readership and postings grow we can see where very popular posts get buried under more recent items. I thought you would enjoy seeing our ten most popular E Mini (E Mini FAQ) or other futures posts.

1. A Billion E Mini Trades?
A Billion E Mini Trades?

2. Investor Power through Education - The Manifesto
Investor Power through Education - The Manifesto

3. E Mini Futures FAQ
E Mini Futures FAQ

4. Gold Futures Versus Leveraged Metals
Gold Futures Versus Leveraged Metals

5. Simple Trading Tip with a Big Payoff
Simple Trading Tip with a Big Payoff

6. Futures Data (Real-Time, End-of-Day, Historical, and Delayed) Futures Data (Real-Time, End-of-Day, Historical, and Delayed)


7. E Mini Traders go Head-to-Head Learn What They Think E Mini Traders go Head-to-Head Learn What They Think

8. Easy-Emini Futures Course has Been Updated
Easy-Emini Futures Course has Been Updated

9. Using Volume to Improve your E Mini Trading
Using Volume to Improve your E Mini Trading

10. IPhone Apps for Futures Traders
IPhone Apps for Futures Traders

Please visit our E Mini Futures Day Trading Course site at www.Easy-Emini.com.

Futures trading involves substantial risk and is not suitable for all investors

10 Things You Can Do to Become a Better E Mini Futures Trader

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Guaranteed to be a better trader? Well, there are no guarantees; however below you will find ten things that in my opinion can only improve on your knowledge. If your knowledge quotient goes up, perhaps that puts you in a better position to become the E Mini futures trader you wish to become.

1. Read at least one thing each trading day about strategy. Learn about how a particular tool, method or strategy works. Do you have to apply each one? No! But learn as much as you can.

2. Build your investment book library.

3. What kind of trader do you wish to be (or already are)? Write it down. If you can’t identify your trading style or path it will be difficult to be successful. Be able to articulate this to anyone.

4. Focus on a sector or specific market. In my opinion, the Live Cattle futures trade differently than the E Mini S&P 500 futures. While it is possible to become knowledgeable about a diverse range of futures markets, if you are a new trader try to sharpen your focus.

5. Keep a trading journal. I have written about this before and I think it bears repeating. It is critical to keep track of your trading. Note the winners and the losers. What happened to cause each result?

6. Develop a method. If you can articulate why you entered or exited a futures trade then you probably should not have done the transaction to begin with.

7. Practice sound money management. Understand how much of your investment you are putting at risk. So many times I see clients come in and leverage the entire account for one trade. Its great if the trade works out, but if not you can be wiped out in a matter of minutes or days.

8. Get educated. There are countless courses out there that may improve your trading skills. Do they all work, no. Is it possible that there are some which may be in line with your trading style and current knowledge base, probably? Even the best and most experienced traders will tell you that they learn something new all the time.

9. Practice as much as possible. If you are working with a new strategy or technique, practice by paper trading. Don’t put up your investment capital to experiment with something new.

10. Have a positive attitude! Before you sit down to trade (or contemplate trading) focus on going in with a good, positive attitude. In a bad mood, not focused, distracted? Go for a walk, do anything but sit down and fork over your hard earned money.

Please visit our site and check out the Easy Emini Futures Day Trading Course: www.Easy-Emini.com
Futures trading involves substantial risk and is not suitable for all investors

FAQ – Gold Futures

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While much of our focus on this blog is E Mini stock index trading I know that there is a huge following for gold futures. To that end I thought I would supply you some assistance on getting your questions answered when it comes to trading gold futures. First, let’s start with the basics:

WHERE ARE GOLD FUTURES TRADED: COMEX Gold futures are traded on the COMEX division of the NYMEX under ticker symbol GC in U.S dollars and cents per troy ounce.
Its precious metals volume exceeds that of all other futures exchanges put together and it attracts world-wide participation, with many traders in Europe, the Middle East and East Asia remaining in their offices until COMEX closes. This gives COMEX unique liquidity, which in turn is much of the reason for its success. Trading hours reflect this and the exchange has opened progressively earlier to suit overseas clients.
WHAT ARE GOLD FUTURES TRADING HOURS: Trading hours futures and options: 8.20 am to 2.30 pm New York time.
After hours futures trading are also available on the NYMEX ACCESS SM electronic trading system, beginning at 4.00 pm on Monday to Thursday and concluding at 7.00 am the following day. On Sundays the electronic session begins at 7.00 pm. All times are New York time.
ARE THE NYMEX AND COMEX THE SAME THING: In 1994, COMEX merged with the New York Mercantile Exchange (NYMEX) and is officially the COMEX division of NYMEX, but it is always referred to as COMEX.

WHAT ARE THE CONTACT SPECIFICATIONS FOR GOLD FUTURE: COMEX Futures
• The COMEX gold futures contract was launched on 31 December 1974.
• The COMEX gold futures contract is based on 100 ounces of gold.
• Prices are quoted in multiples of ten cents per ounce, or $10 per contract.
• COMEX futures are listed on the current calendar month and the next two months and every February, April, June, August, October and December in a 23 month period.
• The June and December contracts are listed out to 60 months to provide expanded trading opportunities for hedgers and speculators.
• Last day of trading for a gold futures contract is the third last business day of the delivery month.
• Delivery is made in registered depository receipts issued by exchange-approved depositories in New York.
• Deliverable gold must be cast in one 100-ounce or three one kilo bars by an exchange-approved refiner and assayed at no less than 995 fineness.
• Turnover on the exchange is usually eight to nine million contracts annually, but in 1999 rose to 9.58 million.
• Open Interest is published daily. It indicates the number of contracts which have not been fulfilled, either by making or taking delivery or by liquidation. The level of open interest is an important signpost to both liquidity and the activity in a given trading month.


Please visit our E Mini Futures Day Trading Course at www.Easy-Emini.com

Futures trading involves substantial risk and is not suitable for all investors

IPhone apps for Futures Traders

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As we all know, smart phones rule the world and in my opinion, the IPhone stands at or near the top. If you are a futures trader, you want to be as connected as possible. I assembled a list to help you stay on top of your futures trading no matter where you are.

iFutures - Mobile Commodities Tracking
Description: Track Commodities Futures from your IPhone or iPod Touch.

Works great on iPad too!
$2.99

FuturesLive: Commodities / Gold / Oil Prices
Description: *** Five screenshots do not do this product justice. Please check our web site for a 40 screenshot tour ***

"Finally ... a futures app worth having" (danthoma Oct 29)
$3.99

StockWatch - Portfolio Tracking & Stock Market Quotes
Description: Keep track of the Stock Market and your Portfolio in an intuitive and feature-rich environment. With over 50 exchanges supported, StockWatch gives you the best overview of your investments, period. Tracks futures too!
$2.99

BlackGold - Oil, Gas, Gold, and Silver Tracking
Description: Mobile Price-Watching for Crude Oil, Gold, Gas, Natural Gas, and Heating Oil on your iPhone or iPod!

Works great on iPad too!
FREE

Trading in Options & Futures
Description: Basic information about options and futures
$1.99

Candice Japanese Candlesticks Index
Description: Japanese candlesticks provide a visual insight into Market psychology as one of many tools in technical analysis of the financial markets for trading success. This app provides 1) quick identification and interpretation of current market trading direction, 2) a complete reference on 100+ Japanese Candlestick patterns, and 3) two training games to build your knowledge of charting patterns.

Candice helps you quickly find the possible Japanese candlestick patterns in a chart from input of the trading situation. No more looking through numerous graphic images to match or memorizing what each pattern means. Enter specific values to find possible matches and then see the trade action. Patterns can also be found by name, prior trend, signal type (bearish/bullish), number of candles, or marked favorites. Each candle pattern provides image, name, signal, reliability, rating, trend, colors, how to recognize, recommended trade actions, and your own custom notes.

Candice employs a visual table of contents as well as a full index dictionary name reference. Caveat notes are provided as a separate extendable database on chart patterns as well as other references.
$3.99

Oil & Gas
Description
The FREE LOGA Oil & Gas App for the iPhone brings you total coverage of the oil & gas industry from a local & national perspective.

Finally, a working app for the oil & gas industry is available for the iPhone.
FREE

QuoTrek
Description: QuoTrek is a service of eSignal, a division of Interactive Data Corporation (NYSE: IDC).

QuoTrek is the only free app that provides the same, award-winning market data used by tens of thousands of eSignal users and professional traders worldwide to monitor all major U.S. and international markets.

QuoTrek offers reliable stock, futures and Forex quotes, market-moving news, charts, watch lists, portfolio monitors and more.

Market Data
Receive free stocks, futures, Forex, market indices and all major instruments from U.S. and world markets.

Energy Markets
QuoTrek offers data from the energy markets, including Natural Gas, Crude, Heating Oil, Unleaded, Propane, Brent…

News
Get market-moving news from the U.S. and abroad, including top stories, economic news and more. Display news by category (includes PR Newswire and Business Wire news).

Charts
Track trends with charts. Rotate the screen horizontally to change time periods and chart types and expand or contract the chart to show more or less history.

Hot Lists
Use this powerful tool to scan the markets automatically and immediately identify trading opportunities from top gainers, losers and volume leaders.

Watch Lists
Customize up to 5 portfolios, each containing up to 40 symbols.

Detailed Quotes

View a detailed quote screen showing open, last, volume, previous, bid, ask, high, low and more.

Special Note
QuoTrek was first introduced as a wireless hand-held device offering streaming quotes and news back in 1983. The original QuoTrek was used by more than 50,000 traders and executives. QuoTrek became available for iPhone users in 2010.
FREE

CME Group Mobile – LITE
Description: CME Group Mobile gives you a 10 min delayed snapshot of the most popular products traded across all asset classes. Quote detail provides a variety of market data including, settle, prior settle, last and net change.

Recently added:
- 10 minute delayed charts
- CMEGroup twitter feed
FREE

Please check out our E Mini Futures Day Trading Course at www.Easy-Emini.com

Futures and options trading involves substantial risk and is not suitable for all investors

Which Index Follows the EMini's?

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One of the most requested topics we see over the web regarding E Mini futures (E Mini FAQ)trading is: Which Index Follows the Emini's?

I think, the more correctly the question is: Which index has an E Mini contract that follows it? I say this because the E Mini futures contract follows an index, not the other way around. Indexes such as the S&P 500 is a futures contract in and of itself and the E Mini mirrors or follows that underlying index.

As a guide, I will list the most popular E Mini futures contracts. While there are mini futures contracts available on almost any futures market, the CME Group's stock index E Mini's are the most popular.

E Mini S&P 500
E Mini Dow Jones Industrial Average Index
E Mini S&P Mid-Cap 400
E Mini S&P Mid-Cap 600
E Mini Nasdaq 100
E Mini Russell 2000

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Futures trading involves substantial risk and is not suitable for all investors

Contract Specifications for E Mini S&P 500 Futures

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Opening Date 9/9/1997
Ticker Symbol ES
ES= Clearing
View product and vendor codes
Contract Size $50 x E-mini S&P 500 futures price
Tick Size (minimum fluctuation) OUTRIGHT 0.25 index points=$12.50
CALENDAR SPREAD 0.05 index points=$2.50
Trading Hours
All time listed are Central Time CME Globex
(ETH) MON-THURS: 5:00 p.m.-3:15 p.m. & 3:30 p.m.-4:30 p.m.
(Daily maintenance shutdown 4:30 p.m.-5:00 p.m.)
SUN: 5:00 p.m.-3:15 p.m.
Contract Months Five months in the March Quarterly Cycle (Mar, Jun, Sep, Dec)
Last Trade Date/Time
View Calendar CME Globex
Trading can occur up to 8:30 a.m. on the 3rd Friday of the contract month
Final Settlement Procedure Cash Settlement. All open positions at close of last day of trading are settled in cash to the Special Opening Quotation (SOQ) on Friday a.m. of the S&P 500 Index.
See SOQ FAQ..
Daily Price Limits RTH: Successive 10%, 20%, 30% limits (downside only)
ETH (overnight): 5% up or down
View price limits details.
Position Limits Work in conjunction with existing S&P 500 position limits
Block Trade Eligibility No. View more on block-trade eligibile contracts.
Block Minimum N/A
Rulebook Chapter 358
Exchange Rule These contracts are listed with, and subject to, the rules and regulations of CME.


Please visit us at www.Easy-Emini.com to see our E Mini Futures Day Trading Course

Futures trading involves substantial risk and is not suitable for all investors

E Mini Futures How-To: Placing Orders

E Mini Futures Trading Tip – Becomming a Better Trader

Please visit our E Mini Futures Trading Course at www.Easy-Emini.com




I may have touched on this topic before here on the Easy-Emini blog, but I believe it is worth repeating, but I think one of the most valuable lessons that can be learned about treading is to not only plan each trade but to keep a log or journal about your progress.



Planning – So often I see traders use the markets like it was the latest X Box game. They do tens if not hundreds of trades in a day. This is fine for a high-end algorithmic trader but for a futures trader just starting out, in my opinion it is a recipe for disaster. What did you learn from either your victories or your defeats? How can you replicate anything if you were doing too many transactions to count? If you planned out what you want to do and executed that plan, even if takes time to develop that plan, do you agree that you at least have a shot at a better result?



Journal – Planning is only half of the battle. Create a simple spread sheet with the basic components of what each trade was about. Dates, times of day, markets, results and brief notes concerning what your plan was and your thoughts about the results.

At the end of each trading day, or week depending upon your volume analyze your data. What worked and want didn’t work? Write down at least one learned thing. Over the course of time these “Learned Things” will help shape the future of your trading and hopefully success.

Please visit our E Mini Futures Trading Course at www.Easy-Emini.com



Futures trading involves substantial risk and is not suitable for all investors

Commodity Trading Advisor Investing

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From our futures brokerage partner site, http://www.tradecenterinc.com/ here is a free report on managed futures:

What if we could take the fear out of futures investing? Get our report on the Commodity Trading Advisor, FCI with a ROR over the last five years of over 25% and last year up over 45%. We can't eliminate the risk but perhaps the fear in investing in a program that lacks the history you seek.




Get the Free CTA Report



Our commitment is to educate our investors on what we believe are unique commodity futures investments. Our report covers the last 3 and 5 year ROR plus last year.



Minimum Investment $50,000



There is no obligation and the report is free.



http://www.tradecenterinc.com/content/the_news/latest_news/invest_without_fear%3f/
 
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Futures and options trading involves substantial risk and is not suitable for all investors

Futures Jargon Definitions

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Like any industry, futurues and E Mini's in particular can be overrun with technical jargon.  While this is not exhaustive, here is a list of frequantly used futures trading terms and their definitions.

Arbitrage: The simultaneous purchase and sale of similar commodities in different exchanges or in different contracts of the same commodity in one exchange to take advantage of a price discrepancy.




Carry forward position: The situation in which a client does not square off his open positions on that day and carries it to the next day is known as the Carry Forward Position.



Cash commodity: The actual physical commodity as distinguished from the futures contract based on the physical commodity.



Cash settlement: A method of settling future contracts whereby the seller pays the buyer the cash value of the commodity traded according to a procedure specified in the contract.



Clearing: The procedure through which the clearing house or association becomes the buyer to each seller of a futures contract and the seller to each buyer, and assumes responsibility for protecting buyers and sellers from financial loss by assuring performance on each contract.



Clearing house: An agency or separate corporation of a futures exchange that is responsible for settling trading accounts, collecting and maintaining margin monies, regulating delivery, and reporting trade data.



Clearing member: A member of an exchange clearinghouse. All trades of a non-clearing member must be registered and eventually settled through a clearing member.



Convergence: The tendency for prices of physical commodities and futures to approach one another, usually during the delivery month.



Day trader: A speculator who will normally initiate and offset a position within a single trading session.



Default: The failure to perform on a futures contract as required by exchange rules, such as a failure to meet a margin call or to make or take delivery.



Delivery: The tender and receipt of an actual commodity or warehouse receipt or other negotiable instrument covering such commodity, in settlement of a futures contract.



Delivery period: The interval between the time when the warehouse receipt is given to the exchange by the seller and the time incurred by the buyer in getting this warehouse receipt is known as delivery period.



Derivative: A financial instrument, traded on or off the exchange, the price of which is directly dependent upon the value of one or more underlying securities, equity indices, debt instruments, or any agreed upon pricing index or arrangement.



Hedging: The practice of offsetting the price risk inherent in any cash market position by taking the opposite position in the futures market. Hedgers use the market to protect their businesses from adverse price changes.



Long: One who has bought futures contracts or owns a cash commodity.



Mark-to-market: To debit or credit on a daily basis a margin account based on the close of that day's trading session.



Open interest: The sum of all long or short futures contracts in one delivery month or one market that have been entered into and not yet liquidated by an offsetting transaction or fulfilled by delivery.



Position: A commitment, either long or short, in the market.



Price discovery: The process of determining the price level of a commodity based on supply and demand factors.



Price limit: The maximum advance or decline from the previous day's settlement price permitted for a futures contract in one trading session.



Settlement price: The daily price at which the clearing house settles all accounts between clearing members for each contract month. Settlement prices are used to determine both margin calls and invoice prices for deliveries. The term also refers to a price established by the clearing organization to calculate account values and determine margins for those positions still held and not yet liquidated.



Short: One who has sold futures contracts or the cash commodity.



Speculator: One who tries to profit from buying and selling future contracts by anticipating future price movements.



Spot: Usually refers to a cash market price for a physical commodity that is available for immediate delivery.



Squaring: The practice by which the goods sold in the market are bought back before the term ends to meet the cycle or the practice that the bought goods are sold before the term ends to settle the deal is called squaring. Here price or commodity is not exchanged, but only profit or loss.

Tick: The smallest allowable increment of price movement for a contract. Also referred to as Minimum Price Fluctuation.



Trade account: To trade in the Futures market the client has to register himself and open an account with the broking organization known as trading account.



Trading lot: Each commodity should be sold and bought in the Futures market at a specific quantity. These quantities are called trading lots fixed by the exchanges. For rubber and pepper it is 1 ton, while it is 1 quintal for cardamom.



Volatility: A measurement of the change in price over a given time period.



Warehouse receipt: When the commodity sold in the Futures market is taken to the warehouse, the client receives a legal document from the warehouse known as warehouse receipt. This document has a trade value.
 
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Futures trading invcolves substantial risk and is not suitable for all investors.

E Mini Futures FAQ

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From the CME Group

E-mini Equity Index FAQContract Specifications and Overview




How are the E-mini contracts similar to their larger counterpart contracts?

The E-mini and the larger contracts are based on the same underlying index (e.g., S&P 500, S&P MidCap 400, NASDAQ-100 and S&P SmallCap 600).



The E-mini and the larger contracts are cash-settled to the same index values on quarterly expirations (the Special Opening Quotation).

The E-mini S&P 500 and E-mini NASDAQ-100 settle daily to their larger contracts' counterpart settlement price, while the E-mini S&P MidCap 400 and E-mini S&P SmallCap 600 daily settlement prices will be used to settle their larger counterpart contracts.

The E-mini and the larger contracts have the same tick size for calendar spread trades of .05 index points.

How are E-mini contracts different from the larger contracts?



The E-mini contract values are one-fifth the size of the larger contracts.

The E-mini tick sizes are different:

E-mini S&P 500 tick size is .25, or $12.50 per tick (.05 for calendar spreads = to $2.50 per tick) versus a tick size of .10, or $25 per tick (.05 for calendar spreads = $12.50 per tick) for the big S&P 500 futures contract.

E-mini S&P MidCap 400 tick size is .10, or $10 per tick (.05 for calendar spreads = to $5 per tick) versus a tick size of .05, or $25 per tick (.05 for calendar spreads = to $25 per tick) for the big S&P MidCap 400 futures contract.

E-mini S&P SmallCap 600 tick size is .10, or $10 per tick (.05 for calendar spreads = to $5 per tick) versus a tick size of .05, or $25 per tick (.05 for calendar spreads = to $25 per tick) for the big S&P SmallCap 600 futures contract.

E-mini NASDAQ-100 has the same tick size of .25 as the big NASDAQ futures. The dollar value of the E-mini NASDAQ-100 tick is $5, while the larger NASDAQ-100 futures is $25. Calendar spread trades for both the E-mini NASDAQ-100 and big NASDAQ-100 futures is .05. the dollar value of the E-mini NASDAQ-100 calendar spread tick is $1, while the larger NASDAQ-100 futures is $5.

E-mini futures have only five quarterly contracts listed for trading.

An order for any quantity may be accepted for E-mini outright futures.

However, orders exceeding a specified number of contracts as indicated below must be entered on the CME Globex system as multiple entries, each of which must not exceed the specified number of contracts.

E-mini S&P 500: 2,000 for outrights and 5,000 for calendar spreads.

E-mini NASDAQ-100: 1,500 for outrights & 5,000 for calendar spreads.

All other CME stock index futures – 500 for outrights & 5,000 for calendar spreads.

An order for any quantity may be accepted for E-mini calendar spreads. However, calendar spread orders for E-minis exceeding 5,000 contracts per contract month must be entered on the CME Globex trading system as multiple entries each of which must not exceed 5,000 contracts.

How do the quarterly E-mini futures settle and when is the last time to trade before expiration?

E-mini quarterly contracts expire at the same time and to the same price as their larger counterpart contracts. For quarterly futures contracts, trading can occur up to 8:30 a.m., Chicago time, on the third Friday of the month.



Is there a post-settlement session for futures in the E-minis?

No.



Are E-mini futures calendar spreads available on CME Globex?

Calendar spread orders for E-minis of any quantity may be accepted for entry on CME Globex.



However, calendar spread orders exceeding 5,000 contracts per contract month must be entered on CME Globex as multiple entries, each of which must not exceed 5,000 contracts.

Trading in the calendar spread may occur at .05-point intervals for the E-mini S&P 500, E-mini NASDAQ-100, E-mini S&P MidCap 400 and S&P SmallCap 600.

Are E-mini options spreads available on CME Globex?

Yes. CME Group updated the electronic equity options functionality available on CME Globex to enable trading of standard listed and user-defined spreads (including covered) for E-mini options. Check with your CME Globex access provider to see if they offer this functionality on your trading platform of choice. This functionality is also available through CME EOS Trader.



Are E-mini FLEX options available?

E-mini FLEX options are not currently available.



Is a position of five E-mini futures contracts financially equivalent to a position of one regular-sized larger futures contract on the same side of the market in the same contract month?

Yes. The daily settlement prices for the E-mini futures contracts are the same as the settlement prices for the corresponding contracts months of the regular-size contracts. Accordingly, a customer who has a long position of five E-mini futures contracts and a short position of one regular-sized futures contract in the same contract month is perfectly hedged. CME Group will impose no initial margin (performance bond) requirements on such a hedged position.



May a customer liquidate E-mini futures positions against offsetting positions in the regular-sized futures contract without making additional trades in the market?

Yes. With the customer's consent, a clearing member may offset and liquidate E-mini futures positions against offsetting regular-sized futures positions held in the same account in a 5:1 ratio of E-mini to regular-sized futures contracts. The positions shall be offset at the previous day's settlement price. The clearing member shall notify CME Clearing of offsetting positions by submitting reports to the clearing house through a special online entry screen designed for that purpose



What are the position limits for the E-minis?

Position limits work in conjunction with the existing position limits for the regular-sized contracts. For example, with the E-mini at one-fifth the size of the S&P 500 futures contract, an entity or an account controller could have 100,000 net E-mini S&P 500 futures equivalents, if no other S&P 500 positions were held open.



What is the reportable position limit for the E-mini contracts?

25 contracts.

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Futures trading involves substantial risk and is not suitable for all investors