Futures contracts exist on a variety of underlying assets from commodities to stock indices. A futures quotation is the price that the long party promises to pay to acquire the asset underlying the contract at some time in the future. For example, if you go long on a futures contract and promise to buy the underlying asset in the future, you do not pay the price to the seller until the contract expires. For security purposes, the exchange on which the futures contract trades will require each party to deposit funds in an account.
Futures quotes vary by underlying asset. Typically, quotes are per unit, but the contract is for several units of the underlying asset. For example, single stock futures quotes are per share prices, but the contract is for 100 shares. Exchanges base margin requirements on the total value of the contract, so capital restrictions will reduce trading volume for most investors. The following steps will help you get started in futures trading:
1. Determine your risk tolerance.
2. Decide what trading strategies you will pursue.
3. Find a source for futures quotes.
Action Steps
The best contacts and resources to help you get it done
Consult with a professional and determine your risk tolerance in dollar terms
A financial planner can help determine how much capital you can stand to lose. This is the maximum amount you should consider investing in futures trading. Furthermore, most popular trading platforms require their clients to have some experience in trading equities before allowing them to open a trading account.
I recommend: Futures speculating is very time consuming, as live futures quotes change constantly. Only you can decide if you can stomach the turbulence of the market. A Certified Financial Planner (CFP) can help determine how futures trading fits into your portfolio. Search for a
CFP by zip code.
Decide which futures contracts you will trade
There is a wide variety of futures contracts available and no individual can trade them all, so it is important to specialize. If you have some knowledge of a particular commodity or group of commodities, then concentrate your efforts on trading those contracts. Once you know the contracts you will trade, determine which trading strategies you will use. Also, live futures quotes will be more important for some contracts than others. Low-volume contracts like housing futures require only daily quotes.
I recommend: This step can follow naturally from your other investment pursuits. For example, if you already invest in individual stocks, consider trading in single stock futures. This way you complement your knowledge. In terms of trading strategies,
United Futures has a guide to basic strategies. You can test your strategies using a simulator such as the one found at
Mock Trading.
Find a source for futures quotes and a trading platform
Depending on the contracts you want to trade, you will need to get quotes from either the Chicago Mercantile Exchange (CME) or the New York Mercantile Exchange (NYMEX). Specialized products are on other exchanges, but the CME and NYMEX cover most futures contracts. The Chicago Board Options Exchange provides futures options quotes.
I recommend: There are numerous futures quotation providers. The
CME offers free live futures prices and live futures charts with a 10-minute delay. If you currently have an open and funded trading account, you may be able to obtain a free live futures quote delivery system.
Quote Tracker offers a platform for those with a TD Ameritrade account. Stock futures quotes are available from
One Chicago.
Tips & Tactics
Helpful advice for making the most of this Guide
- The CME allows you to download historical futures quotes. These make an excellent sample to test the trading strategies you develop. You can also use the data to detect cyclicality or find trends.
The official source of Futures Quotes is the Futures Quotes page at Business.com
Related Resources from Business.com
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