501 Commodity Trading Lab
Index - Topics to cover ● What are futures contracts. ● Why do we trade futures. ● Who trades futures. ● How do we trade futures (long, short). ● Where are futures traded. ● Game platform.
What is a futures commodity contract? ● A commitment to either buy or sell a determinate kind and amount of product at a particular price in a future date. ● Commitment to sell > short ● Commitment to buy > long
Why do we trade futures? ● To manage risk.
Who trades futures? ● Producers and Merchants/Processors (B2B) ● Speculators
Coffee Supply Chain
Buy Sell
Buy Sell 2-3 Months
September 2015 December 2015
September 2015 $100 Price December 2015
September 2015 $100 Price December 2015 Long Agrees to buy @100
September 2015 $100 Price December 2015 Long Agrees to buy @100
September 2015 $100 Price December 2015 Long Agrees to buy @100
September 2015 $100 Price December 2015 Long Short Agrees to buy @100 Agree to sell @ $100
September 2015 $100 Price December 2015 $60 $100 -40 Long Short Agrees to buy @100 Agree to sell @ $100
September 2015 $100 Price December 2015 Long Short Agrees to buy @100 Agree to sell @ $100
September 2015 November 29 $100 $90 Price December 2015 Long Short Agrees to buy @100 Agree to sell @ $100
September 2015 November 29 $100 $90 Price December 2015 Short Long Agree to sell @ $100 Agrees to buy @100 Agreement buy-sell @ approx $90
September 2015 November 29 $100 $90 Price December 2015 Short Long Agree to sell @ $100 Agrees to buy @100 Short Long Agree to sell @ $90 Agrees to buy @ 90 Agreement buy-sell @ approx $90
Where are futures traded? ● At a market place > Exchanges > For profit companies ● Make money on fees and commissions ● Trading pits are gone, electronic trading. ○ Outcry Pit CBOT. https://www.youtube.com/watch?v=2eiWYNzF6Uc ● Many exchanges have recently merged into larger companies.
The platform ● StockTrack. http://www.stocktrak.com/ ● Be sure to look at the FAQ. http://www.stocktrak.com/Public/content/support.aspx ● Futures Order Types (Stop, Limit). http://www.pricegroup.com/futuresOrderTypes.asp#limit
Things to look at (resources) ● Exchanges websites ● Crop production reports are issued by the U.S. Department of Agriculture (USDA) ● Commodity specific associations ○ National. ■ Ex. Green Coffee Association (USA) ○ International. ■ Ex. International Coffee Organization ● Weather reports ● Complements and Substitutes ● Analysis web sites ○ MarketWatch. http://www.marketwatch.com/ ○ Barchart. http://www.barchart.com/ ○ StockCharts. http://stockcharts.com/ ○
Resources within Exchanges sites CME Reports, Research and Analysis, USDA Calendar http://www.cmegroup.com/trading/agricultural/ Group ICE ICE Report Center and Insights https://www.theice.com/marketdata/reports SICOM Singapore Commodity Exchange http://www.sgx. com/wps/portal/sgxweb/home/marketinfo/derivatives/delayed_prices/! ut/p/a1/04_Sj9CPykssy0xPLMnMz0vMAfGjzOKNHB1NPAycDSwN3DxdD TwN_T2MvNw8jNw9zYAKIpEV- Icamht4hjoFmjiFhRp6AxUQpd8AB3A0IKQ_XD8KVYmFkTvQBYZmgc6GI c7G3m6G6AqwOBFNQZgBSIG_U3BwWJhhoKsxVAEeRxbkhkYYZHqmA wBYGvuN/dl5/d5/L2dBISEvZ0FBIS9nQSEh/ Bursa Brochures and Education http://www.bursamalaysia.com/market/derivatives/products/commodity- Malaysia derivatives/crude-palm-oil-futures-fcpo BOVESPA Commodities and Futures http://www.bmfbovespa.com.br/en-us/markets/commodities-and- futures/commodities-and-futures.aspx?idioma=en-us
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