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Winning In The Futures Markets B



"The two-year yield after today is going to be below fed funds rates," he said. "I think to me, that's why they would have to be quite hawkish to shock markets, and there's a possibility markets would just challenge the fed on a view like that."




Winning In The Futures Markets B



CME Group is focused on delivering new ways to manage risk and improve performance. Whether it's a new futures contract for the evolving cryptocurrency market, tracking emerging benchmarks like CME SOFR Term Reference Rate or backtesting alternative data sets, new opportunities are always waiting our market participants.


Register and access premium tools that help you evaluate your customized product portfolios, or discover capital efficiencies with our suite of services. Explore educational courses on trading strategies and stay informed with alerts, daily reports and research. Tour extensive trading resources and education tailored to the needs of individual traders and designed to help position you for success. When you're ready, view our directory of futures commission merchants or clearing firms to get setup to trade.


Fraud, theft, corruption, bribery, environmental crime, market manipulation, and anticompetitive agreements threaten the free and fair markets upon which our economy is based. They decimate the assets of individuals, organizations, and governments alike. And they increase costs for every American.


FIN 350 Business Finance (4)Evaluating and funding projects within the firm. Time value of money, inflation, capital budgeting; risk and return in the financial markets, stocks, bonds, portfolios and diversifiable risk, market efficiency and the balance between debt and equity to fund the firm. Prerequisite: ACCTG 225; ECON 201; either MATH 112, MATH 124, MATH 125, MATH 134, or Q SCI 291; either IND E 315, QMETH 201, Q SCI 381, PSYCH 315, PSYCH 318, STAT 220, STAT 221/SOC 221/CS&SS 221, STAT 311, or STAT 390/MATH 390.View course details in MyPlan: FIN 350


FIN 435 Introduction to Real Estate Capital Markets (4)Examines who the real estate capital providers are, how that capital is priced, and why the markets operate as they do. Provides a toolbox for sound decision-making, either as an investor seeking funding or as a note-holder in the secondary market. Prerequisite: FIN 350.View course details in MyPlan: FIN 435


FIN 461 Financial Futures and Options Markets (4)Introduction to financial futures and options markets. Institutional aspects and social functions of these markets, pricing of options and futures, and risk shifting by hedging. Prerequisite: FIN 350; either B ECON 300 or ECON 300; may not be repeated.View course details in MyPlan: FIN 461


FIN 462 Management of Financial Risk (4)Modern tools for managing financial risk. Fixed income securities and interest rate risk, credit risk, foreign currency risk, and insurance. Emphasis on use of futures, forwards swaps, and option contracts. Prerequisite: FIN 350; either B ECON 300 or ECON 300.View course details in MyPlan: FIN 462


FIN 467 Fixed Income Securities (4)Examination of the main concepts and participants in the fixed income markets, with an emphasis on the risks and other instrument-specific factors that differentiate fixed income securities, as well as the tools and techniques for pricing and managing the risk of fixed income securities. Prerequisite: FIN 350; and either B ECON 300 or ECON 300.View course details in MyPlan: FIN 467


FIN 505 Corporate Finance (4)This course elucidates the theory of corporate finance, and explores how it's applied in the financial decision making of a firm. The study of these decisions will involve understanding how capital markets function and learning to use and evaluate performance of a company, business, or department based on financial models. Offered: Sp.View course details in MyPlan: FIN 505


FIN 561 Financial Futures and Options Markets (4)Overview of futures markets and options markets. Analysis of pricing of futures contracts and options; comparison of futures, forward, and options contracts; risk management with hedging; alternative investment strategies; and review of empirical evidence. Prerequisite: MBA Core Finance.View course details in MyPlan: FIN 561


FIN 562 Management of Financial Risk (4)Modern tools for managing financial risk. Fixed income securities and interest rate risk, credit risk, foreign currency risk, and insurance. Emphasis on use of futures, forwards, swaps, and option contracts. Prerequisite: MBA Core Finance.View course details in MyPlan: FIN 562


FIN 591 Doctoral Seminar in Corporate Finance (4)Principles of intertemporal choice, alternative valuation models, theory of investment under uncertainty, impact of dividend and financing decisions on firm valuation in perfect and imperfect markets, and theory of firm organization and agency costs. Prerequisite: FIN 590 and BA RM 581 or ECON 582 or permission of instructor.View course details in MyPlan: FIN 591


Standard II(B) requires that members and candidates uphold market integrity by prohibiting market manipulation. Market manipulation includes practices that distort security prices or trading volume with the intent to deceive people or entities that rely on information in the market. Market manipulation damages the interests of all investors by disrupting the smooth functioning of financial markets and lowering investor confidence.


Market manipulation may lead to a lack of trust in the fairness of the capital markets, resulting in higher risk premiums and reduced investor participation. A reduction in the efficiency of a local capital market may negatively affect the growth and economic health of the country and may also influence the operations of the globally interconnected capital markets. Although market manipulation may be less likely to occur in mature financial markets than in emerging markets, cross-border investing increasingly exposes all global investors to the potential for such practices.


ACME Futures Exchange is launching a new bond futures contract. To convince investors, traders, arbitrageurs, hedgers, and so on, to use its contract, the exchange attempts to demonstrate that it has the best liquidity. To do so, it enters into agreements with members in which they commit to a substantial minimum trading volume on the new contract over a specific period in exchange for substantial reductions of their regular commissions.


Comment: Mandeville manipulates the inputs of a model to minimize associated risk to achieve higher ratings. His understanding of structured products allows him to skillfully decide which inputs to include in support of the desired rating and price. This information manipulation for short-term gain, which is in violation of Standard II(B), ultimately causes significant damage to many parties and the capital markets as a whole. Mandeville should have realized that promoting a rating and price with inaccurate information could cause not only a loss of price confidence in the particular structured product but also a loss of investor trust in the system. Such loss of confidence affects the ability of the capital markets to operate efficiently.


For example, with a futures contract, an investor could control $100,000 of a commodity, such as silver, with only a $5,000 deposit, known as a margin deposit. For this reason, investments that fall under Section 1256 can result in huge gains or losses.


In today's farming environment of extreme price volatility and large debt commitments, most livestock producers need the security of one or more of the advantages offered by price risk management. Livestock producers who are selling products or purchasing inputs can do one of two things when making pricing decisions: accept the market price when they are ready to deliver products or purchase inputs, or reduce input and product price risks by using price risk management tools. One of these price risk management opportunities is available through futures markets contracts. This publication explains how livestock producers can use futures markets to manage price risk.


Two groups are interested in futures trading -- speculators and hedgers. Speculators enter the futures market with the objective to make a profit from changes in futures prices. They establish a price for a commodity that they neither currently own nor have committed to produce. They have no intention of either delivering or accepting delivery of the product traded. Speculators trade to make a profit from price level changes. They may not even know what a soybean looks like, or the difference between a Holstein and a Hereford. However, they do know (or think they know) that the price of beans or cattle is too low (or high) and hope that by buying (or selling) futures contracts today they can later liquidate the contracts at a profit. So the key to speculating is buying low and selling high or selling high and buying low. Sounds easy, doesn't it? Well, before you jump in, be assured that the majority of futures market speculators (in fact, almost 90 percent) lose money at some point.


The other trader in the market is the hedger. The hedger establishes a price for a commodity that is either currently owned or committed for production and that will be delivered at some time in the future (e.g., grains, oilseeds or livestock), or that will be purchased in the future (e.g., feed ingredients bought by livestock producers, or crops by elevators, gins, etc.). Hedging is exactly the opposite of speculating in the market. Speculators are in the futures market to capitalize on price changes, while hedgers are in the futures market to mitigate the risk associated with price changes. Hedgers want to protect a price that will make them a profit.


Hedgers using the futures market take an offsetting position from the one they have in the cash market. For instance, when hedgers use the futures market to sell, they sell commodity futures contracts to establish a price. They sell because this is the opposite of their buying position in the cash market. Another way to keep this straight is to think of it as pre-selling in the futures market. Then, when the product is actually ready for delivery in the cash market (when they are ready to take the grain to the local elevator, the feeder cattle to auction or their specific cash marketing method), they buy the contracts in the futures market to offset or nullify the previous sale and deliver the product to the local market. Thus, any profits (losses) made in the futures market are to some extent offset by opposite losses (profits) in the cash market. It's similar to a balancing scale -- when one goes up, the other goes down. In terms of money, this places the hedger back at the originally estimated price.


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