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I received an email from a student in Singapore regarding the margin for Spread trading and where to find it. Spread trading is gaining more popularity, even internationally based on the emails I have been receiving. Let’s now look at two different Futures Exchanges and identify the process of figuring out how much Margin (capital) is required to trade these things called Spreads. Spread trading involves the simultaneous purchase of one month and simultaneous sale of another month of the same Commodity to be an Intra-Commodity Spread. To simultaneously purchase and sell related Commodities is known as an Inter-Commodity Spread. The Intra-Commodity Spread is the least volatile and risky of the two. Notice I said “least” not “risk...

As we come into the growing season for many of our agricultural Commodities, there will be numerous opportunities to trade the volatility created by weather, crop estimates and other fundamentals. I mention the agricultural markets because they offer some of the finest opportunities. However, other markets can be spread, also. For example, here are just a few: Ten Year Treasury Note / Thirty Year Treasury Bond Live Cattle / Lean Hogs Euro FX / Aussie Dollar Gold / Silver Spreading offers the Futures trader an opportunity to trade these markets with less capital than on outright Futures position, while being hedged at the same time. This hedge does not mean you cannot lose money, it simply implies you are long one Futures...

Ever wonder what makes a winning trader consistent? In my opinion that consistency is due to the trader having his own "edge" over other traders. This "edge" is what each trader must find for himself. Often traders focus on their results so much that they forget that every other trader in the world is doing the same thing: Trying to profit from price action alone. Trading this way can make you money, but what if you had an added edge to your strategy? In Commodity Futures, we have something called Open Interest that just may provide that advantage. What is This Open Interest? Open Interest is the total number of outstanding contracts that are held by market participants at the end of the day. Contracts that are held overnight have...

One of the most frustrating aspects of trading commodities is getting comfortable with how each contract is quoted, what the point value or multiplier of each contract is and most importantly how to calculate the profit, loss and risk of a trade. Each commodity futures contract is standardized but in comparison to those with differing underlying assets they are often worlds apart. This can be extremely overwhelming for a new trader; I hope that the following explanations shorten your learning curve and give you the information that you need to begin your journey in the challenging yet lucrative trading arena known as options and futures. Unfortunately, until recently there hadn't been much in the way of uniformity in commodities. With...

Finding your very own unique commodity trading edge is a worthwhile goal. Without one you are lost in the masses, struggling to push your head above the sea of expenses. Trading edges do exist, though for short periods of time. Psychological edges are more permanent. You need many. Here's how to find yours. First let's talk about a good market for day trading. Next, we'll talk about finding a trading "edge." The S&P 500 Index futures contract market may be the best futures game around for day-trading. It's liquid and the swings are usually large enough every day to make it worthwhile. The electronic e-mini futures market (the mini S&P 500) is lightning fast for executions that rival or even exceed the floor-trader advantage. However...

Ever wondered about Futures Spread Trading? In this article the author looks at the basics and the best way to trade them. How professional traders optimize profits Futures spread trading is probably the most profitable, yet safest way to trade futures. Almost every professional trader uses spreads to optimize his profits. Trading spreads offers many advantages which make it the perfect trading instrument, especially for beginners and traders with small accounts (less than $10,000). The following example of a Soybean-Spread shows the advantages of futures spread trading: Example: Long May Soybeans (SK3) and Short November Soybeans (SX3) Four Advantages of Futures Spread Trading Advantage 1: Easy to trade Do you see how nicely this...

Without a doubt, more people follow the price of Gold than any other commodity in the world, and with good reason. Gold, that archaic, barbaric, precious metal men and women have coveted since the dawn of mankind, not only presents wonderful opportunities for making money, it also continues to have a major impact on currencies, interest rates and markets across the globe. Four factors that influence Gold While there are many factors that have some impact on this glittery metal the ones that I have found to have the most impact are: The US Dollar Relationship The Seasonal Pattern The Commercials Stockmarket Crashes/ Depressions Let's start by looking at the relationship between gold and dollar index , specifically the United...

One of the best kept secrets in trading is that of reduced margin spreads. You cannot name a trading method that provides more safety or a greater return on margin than does a reduced margin spread, while also being one of the least time-consuming ways to trade. Have you ever asked yourself why it is that many of the largest, most powerful traders trade spreads? I'm going to show you why! What is a reduced margin spread? Because of perceived lower volatility, exchanges grant reduced margins on certain types of spreads. Spreads consist of being long in one or more contracts of one market and short in one or more contracts of the same market but in different months - an intramarket spread; or being long in one or more contracts of one...