Trading Futures on the Commodity Market

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Trading Futures on the Commodity Market

• Stocks and Commodities
• 2003-2004

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Common Orders on the Futures Exchange

• Market Order
• Price Limit Order (executed at price or better)
• Fill or Kill Order (limit order that must be
  filled immediately)
• Stop Order (not executed until the market reaches
  a given price)used to cut losses

Gem Stones
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More Common Orders on the Futures Exchange

• Stop-Limit Order (executed at the exact price)
• Market if touched order (executed if market
  reaches a particular price)
• Time Limit

Grain
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The Route of an Order

• Time-stamped
• Runner carries to the broker in the pit
• Broker fills the order
• Broker reports the price to exchange price
  reporters
• Computer transmits the price information
• Completed order is picked up by the runner

Currency
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Clearing Process of an Order

• Customer places order
• Brokerage fills order
• Order is cleared through a clearing member firm
• Clearing member firm transmits order to
  clearinghouse
• Clearing house confirms order and guarantees the
  trade.

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Regulation of Futures Trading

• Individual Exchange Regulations
• Trading Behavior Rules
• Grievances
• Arbitration
• Federal Laws
• Grain Futures Act
• Commodity Exchange Act
• Commodity Futures Trading Commission Act
• Future Trading Act

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Hedging in the Futures Markets

• Protection against Price Changea defense against
  unwanted price change and the possibility of
  total loss
• Futures Contracts

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Yield Curves

• Positive Yield Curve
• Negative Yield Curve
• Time (Years) versus Yield