Futures Contracts and How to Invest in Future Contracts and Stocks

Futures Contracts
The futures market is an organized market in which futures contracts on commodities and financial futures are negotiated.

Some commodities include agricultural products, such as corn, soybean, barley, orange juice, cattle, pork bellies, coffee, cotton and lumber, and metals such as gold, platinum, silver and copper. There are a fixed number of financial futures that are included in negotiations in contracts with US Treasury notes and bonds. The stock market indices such as the Dow Jones Industrial Average and the Standard & Poor?s (S&P) 500 Index, the Municipal Bond Index and foreign currencies such as Euros, Japanese yens, Swiss francs, and British pounds.

Negotiating in the futures market can be as exciting for an adult as riding on a roller coaster could be to a kid. There are overnight profits and losses that are of greater magnitude than those given in other financial investments such as stocks and bonds.

Consequently, investing in futures markets is within the riskiest investments.

Procedures on how to invest in futures contracts and stocks
The futures market is an agreement between a buyer and a seller to take or make a delivery of a commodity or financial security in a particular date in the future at an agreed price.

The futures exchanges are where futures contracts are bid and offered by traders. A commodity or financial futures can be bought for a current or future delivery.

A futures contract is a binding contract that is standard. A commodity contract specifies the type of commodity, degree, and size. For example, a corn contract from the Chicago Board of Trade is negotiated in 5,000 bushels of number 2 yellow corn.

The month of delivery is the specified month within which the delivery is done. The month has direct influence on the life span of the contract in the same way that an option.

For corn contracts, the months of delivery are March, May, July, September and December. Exchanges also have their own hours of negotiation opposite to stocks that begin their negotiations in the New York Stock exchange (NYSE) at 9:30 am eastern time and close at 4pm.

For example, the US Treasury bond futures are negotiated since 7:20 am up to 2 pm while the S&P 500 Index futures contract are negotiated between 8:30 am and 3:15 pm . Commodity contracts are also negotiated at different hours.