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Friday, March 19, 2010

Commodities Trading and Futures Speculation (Series): Contracts Specifications - Size and Limits (VIDEO)

"We must learn our limits. We are all something, but none of us are everything." - Blaise Pascal

This vlog entry is a continuation in a series of videos, the "Commodities Trading and Futures Speculation", and is continued from the previous entries.

Introduction: I discussed some of the myths regarding commodities speculation, and introduce the entire series.

The Reason for the Markets Existence: We discussed that the commodity futures markets exist, to allow companies, farmers, and others involved in production within the economy to hedge themselves against catastrophic losses. This in turn, keeps unemployment lower, and reduces volatility in the economy.

Why Traders Trade Commodities: Ok, if the commercial interests use the commodity markets to protect their business profits, then why are traders in those future markets? We discussed liquidity, and that the commercial interests need that trader liquidity, in order to hedge more efficiently. Without traders, the commercial interests have a very difficult time operating in the markets.

Collective Crowd Wisdom: We next discussed the free market benefits that traders bring to table while they are trading future delivery contracts.

Contacts and More Contracts: Is there some vast conspiracy, in that all commodity futures have more contracts trading in active months than there is the amount of that particular commodity in the world? Is the "Comex going to default"? No. It has to do with liquidity needs, and we discuss this.

Contract Specifications - Expiration:
You can hold Bank of America stock from now, until kingdom come. Commodity Future contracts on the other hand ... expire. We discussed this, and the nature of commodity future contracts in this vlog.

In today's entry, we discuss how the size of contracts affects what you need to trade those contracts, as well as "movement limits" that some contracts and commodities have ...

(Video Included. If you're seeing this entry elsewhere and cannot see the Video? Click here to view the entry ...)

I'll have the "Friday Review" entry out tomorrow. I'm sorry folks, but it's just too beautiful outside ...

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Note: This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have over 13 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research, and tolerance for risk.


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