An Introduction to Global Futures
Our job at CK Locke & Partners is to be a bridge the world of futures trading and help your transition into this exciting arena. Our research team has formulated strategies for specific futures markets, which are presented regularly to clients as part of our advisory service. For those wanting to trade the futures markets without our advice, our team can provide feed-back on key issues such as fundamentals, liquidity and seasonal price behaviour, advice invaluable to those starting out as well as sounding boards to our more experienced clients – "We Speak your Language", no matter what "school of thought" you belong to.
Futures markets are traded globally through various world futures exchanges. This futures section focuses on the SPI 200 and other Sydney Futures Exchange Limited (SFE) contracts because they are Australian and relate to the share market. However bear in mind that all futures contracts work the same way. That is if you know how to trade one, you know how to trade them all. We are of the opinion that futures trading is less complicated than share trading. How so? Because, generally, there are less than 50 global futures contracts that investors study and trade. We feel that watching less than 50 markets is a manageable task. These compares with literally thousands of shares traded in Australia alone.
Another big difference is that you generally require much less capital to trade futures contracts as compared to share trading. This is because you are only required to provide an initial deposit, which amounts to a fraction of the contract’s cash value. Speak to your friendly advisor at CK Locke & Partners to get current Margin Requirements for each contract.
Futures trading has expanded to virtually every nation of the world. Most commodities can be traded, from cocoon futures in Japan and pepper futures in India to pork bellies in the United States and French bond futures in Paris. In countries like Russia and China, the explosive growth of futures contracts has been a natural response to increased price volatility, international instability, growing consumer demand, and unstable global weather conditions.
Currently, there are many global futures exchanges offering a high level of liquidity and opportunity to investors from around the world. A retailer of winter clothing in Sydney afraid of exchange rate fluctuations when exporting to the United States can hedge against that risk by buying futures contracts or options on the Australian dollar, which is traded via the International Monetary Market (IMM) established by the Chicago Mercantile Exchange (CME). Similarly, an Australian gold mining company could hedge against fluctuations in gold prices by selling gold futures traded on the COMEX (Commodity Exchange, Inc.) in New York.
If you’ve ever wondered how you could trade the Aussie dollar, wheat, gold or crude oil prices, then we are here to assist you. For those interested in global futures, we welcome you to ask us about our various strategies or to discuss specific futures contracts that have captured your imagination (eg pork bellies or coffee beans!). When constructing a balanced investment portfolio, consideration needs to be given to the similarities between different asset types in order to reduce correlation. With this in mind, investments of different asset types such as futures included in a portfolio can possibly have the effect of reducing volatility and potential increasing the returns.
* Deposits can vary due to market volatility.