Underlying futures commodities
The first futures to ever be traded had agricultural underlying assets. The world’s first stable futures exchange in Dojima traded rice and the Chicago Mercantile Exchange (CME) followed in the grain trading game, dealing in futures for wheat and corn. The existence of neighbouring exchanges such as CME and the Chicago Board of Trade lead to a lot of arbitrage
opportunities, especially with agricultural futures in the past few years.
Here are some examples of agricultural futures today:
|Cotton||Pork bellies||Orange juice|
|Live cattle||Feeder cattle||Sugar|
The market for these futures is divided into precious metals and base metals. The London Metal Exchange is the world’s largest dealer in futures contracts on base and other metals. The LME offers worldwide reference pricing
, which is certainly worth a closer look. Rare metals such as lithium and titanium are normally not traded on futures exchanges. The LME however, is adding molybdenum and cobalt to its collection of traded assets.
Examples of metal futures are:
While hedgers consistently secure themselves months of gasoline supplies, even at the risk of loss, speculators in the petroleum futures market play a dangerous ball game. OPEC, war and wild economic fluctuations create plenty of opportunities as well as plenty of risk for those that play this market.
Also known as ‘energy futures’, this category includes
|Asphalt & road oil||Kerosene jet fuel||Natural gas|
|Gasoline||Heating oil no. 2||Coke|
|Unleaded gasoline||Liquid refinery gases||Lubricant|
The first currency futures were traded by the CME, an establishment that then went on to create the International Monetary Market. Other prominent exchanges for these futures are EURONEXT and the Intercontinental Exchange.
People that are successful in the forex (foreign exchange) market should have no trouble playing with currency futures. Due to the mark-to market feature of futures, profits will be realised immediately. Together with forex trading and smart strategy, this financial futures is a powerful tool for playing the world market.
Examples of underlying assets are:
|Euro||Australian dollar||Mexican peso|
|British pound||Canadian dollar||Indian rupee|
|American dollar||Japanese yen|
The underlying asset here is a debt obligation which futures traders use to protect themselves from loss through hedging. For example, creditors face the risk of falling interest rates. The creditor will take a short position (to sell) interest rate futures. If interest rates do fall, as feared, the creditor will still make a profit.
Interest rate futures include:
|30 day federal funds||2 year treasury notes||Treasury notes|
|Treasury bonds||5 year treasury notes||Eurodollar|
Stock index futures are used for hedging, investing and trading. When purchasing index futures, buyers gain access to a sector of the stock market without having to actually purchase shares from it. Many traders purchase indexes early in Eastern Time to obtain knowledge of where the stock markets in the west are heading. The Standard & Poor’s 500 index is America’s most widely traded index futures.
Other index futures are:
|Mini NASDAQ 100||Mini DJ Industrial Average||Mini Standard & Poor’s 500 Index|
|Russell 1000||U.S Dollar Index||DJ Industrial Average|