Futures For You
Inside The Futures World
Want to find out how the futures markets really work? Carley Garner is the senior strategist for DeCarley Trading, a division of Zaner Group, where she also works as a broker. She authors widely distributed e-newsletters; for your free subscription, visit www.DeCarleyTrading.com. Her books, Currency Trading in the Forex and Futures Markets, A Trader’s First Book on Commodities, and Commodity Options, were published by FT Press. To submit a question, post your question at http://Message-Boards.Traders.com. Answers will be posted there, and selected questions will appear in a future issue of S&C.
I’m interested in trading foreign futures in an account held at a US brokerage firm; what should I be aware of?
Most US brokerage firms offer their clients access to foreign futures and options. If your broker doesn’t, you should reconsider where you house your commodity trading account. Even if you don’t intend to trade foreign markets, that they are offering you limited product access is a telltale sign of a brokerage that simply isn’t equipped to specialize in commodity trading. Perhaps their focus is in stocks or FX, but it isn’t futures.
Which futures markets should I focus on, and which should I avoid?
Ultimately, the key to fluid and reasonable price action is liquidity. As we all know, even in the deepest and most commonly traded markets there will be temporary lapses in judgment that cause pricing to enter ridiculous territory. Nonetheless, such abhorrent pricing happens far more frequently in thinly traded futures markets.
What is a commodity pool? Is this a viable way to get into the commodity markets?
Commodity pools are essentially the mutual funds of the futures industry. By definition, a commodity pool is a private investment structure, typically a limited partnership, that combines the contributions of multiple investors to be used in futures and option trading in the commodity markets. Simply put, a commodity pool is a fund that operates as a single entity to speculate in the futures markets on behalf of the fund’s investors. Another way to look at a commodity pool is as a specialized hedge fund that deals only in futures, or options on futures, traded on organized futures exchanges and is registered as such with the appropriate US regulators.
Gold has dramatically underperformed recently. Is this the new norm?
The truth is, there is nothing normal about markets or trading them. The current environment encompasses market sentiment and volatility levels, but tomorrow could be dramatically different. Accordingly, what you assume to be the norm won’t necessarily carry into the future.
Since posting an all-time-high in September 2011 near $1,900, the asset class once revered as a safe haven has been tearing holes in investment portfolios. Just as traders and investors were willing to jump on gold’s bullish bandwagon, the speculative community has turned on the yellow metal with vengeance.
An intermarket relationship is simply the manner in which particular markets behave in relation to each other; more specifically, it is the correlation between two otherwise unrelated markets. Among the most monitored relationships are those between stocks and bonds, and the US dollar and commodity prices.
Most people assume that stocks and bonds will always be negatively correlated (that is, moving in the opposite direction).