Many of those new to trading will have difficultly understanding the concept of a margin. This short article puts things in perspecitive. When you hire a car, you pay a deposit. When you take out a home Continue Reading

Question: Hi Guy I have read the book [Three Little Spreads Went to Market]. Very informative thanks. I have been looking for an alternative to shares that doesn’t have the extreme risk of some other derivative products. Just a quick question: do you see a specific amount in an account to make this type of trade viable? Is it $5,000 or closer to say $50,000? And what is the margin for these contracts? I see in your performance section an allocation could be $20,000. What would a margin be for this? Thanks, B Answer: Re finding the right thing to trade, what I do is a niche within a niche. Not just futures, but Continue Reading

Question: Dear Guy. Great video on iGoogle [this one]. I noticed on your page you had a link to a few stock quote gadgets. They seem like a great idea. Would you mind supplying the links to those? Answer: Thanks for the feedback. Yes the iGoogle thing is fantastic. It’s amazing how much you can get for free. Here is the link for quote gadget: Continue Reading

Q: Aren’t options spreads cheaper to trade than futures spreads? A: This question is based on a misunderstanding of the mechanics of futures and options trading. Options: With options, including options on futures, you pay a “premium” when you buy an option and receive the premium when you sell an option. If you pay 10 cents for an option that 10 cents is debited from your trading account. If you sell an option for 15 cents, that 15 cents is credited to your account. Taking the example further, suppose these two options make up a spread. That is, you buy one option for 10 cents and sell a different option for 15 cents. The net amount (5 cents) is credited to your account. Futures: For futures contracts, it’s different. The price paid or Continue Reading

Question: What are the charts saying to you regarding Euro/Sterling? Do you think Sterling is likely to slip further against the Euro or the reverse? Answer: Currencies are not my main thing, but I’ll jot down a couple of thoughts. 1. Economics It is thought the Euro-zone recovery will be sooner/stronger than the UK recovery. Continue Reading

Question#1: Is it too dangerous to leg in to a butterfly spread trade? Answer: The answer to that is yes and no. I’m not meaning to be vague, but sometimes it can be risky and other times it can be beneficial. That said, since the butterfly is made up of two spreads, it’s not a terrible idea to enter the trade as two separate spreads. I do this when placing condor/butterfly spreads on the S&P for example. Despite the S&P options market being very liquid, I find it easier to get a fill if I place two spread orders (vertical call spread and vertical put spread). Question #2: I am familiar with option strategies. Can I apply most of the option strategies with the futures like there is an option strategy with is called butterfly and you did the same now with futures? Continue Reading

I often have people asking me about “Eurodollars” in reference to currency trading. It is actually a common mistake people make, but the “Eurodollar” contract is not a currency. It is an interest rate contract. The “Euro Continue Reading

Q: What is a credit and debit spread in futures (not options)? A: The two terms refer to the pricing of a spread position. Credit means the sell price is greater than the buy Continue Reading

Market Profile is a method of charting. It is not extensively used outside of dealing rooms. I used to use this method quite a lot and found it to be very good in bond futures during volatile periods. I Continue Reading

Q: Do you follow only seasonal data or are there other factors involved in your spread trading? A: My entry or exit rules are not based entirely on seasonal data. Seasonal data is used as a guide much like any kind of indicator, but it is not ‘the complete system’. I don’t believe in Continue Reading

I recently saw the following post on an investment forum. I thought it would be an interesting topic for my newsletter. So here is my long answer: Question: Is the risk factor of investing in commodity futures greater or lesser than that in funds? Answer: Generally speaking the risk of trading futures is greater Continue Reading