Positron Investments

Trading & Education in Options, Futures, Stocks, Forex
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Futures basics

  • Futures basic concepts
  • Futures trading
  • Initial & maintenance margin
  • Mark to market
  • Futures chain
  • Futures term structure
  • Backwardation & contango
  • What is basis
  • Basis risk
  • Convenience yield
  • Futures theoretical value
  • Cost of carry
  • Corporate hedging using futures
  • Spread strategies using futures

Futures trading

Trading futures is similar to trading stocks but with a high degree of leverage, hence it can potentially be more risky. There are two possible positions, long and short. When we are long we are profiting from a rising of the future contract price. Assume that we have bought 1 contract of WTI crude oil at $100/barrel. The contract refers 1000 barrels of oil. If the price goes to $105/barrel we can sell it and close the position achieving a profit of $5/barrel (total profit=$5,000). If the future price goes to $95/barrel then we can close the position but this time with a loss of $5/barrel (total loss=$5,000).

When we are short a futures contract then we are profiting from a decline of its price. If we short sell 1 contract of WTI crude oil at $95/barrel then if its price goes to $90/barrel we can close the position (by buying it back) and achieve a profit of $5/barrel (total profit=$5,000). If the future price goes to $100/barrel then we will have a loss of $5/barrel (total loss=$5,000).

Stop orders are essential in order to protect ourselves from great losses.

Links

  • Bloomberg.com
  • Capital.gr
  • chartmill.com
  • Finviz.com
  • Forexfactory.com
  • Freestockcharts.com
  • Yahoo Finance

Recent posts

  • Possible breakdown in Greek stock exchange
  • Application of a simple strategy in EUR/USD
  • S&P 500 runs out of fuel
  • Short term downtrend in Greek stock exchange
  • Possible upward movement in S&P 500

Blog categories

  • Day/swing trades
  • Economy/Politics
  • Trading signals
  • Trading strategies

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