Unraveling the Complexities of Futures Market

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Delve into the world of futures trading with the "Futures Fundamental Analysis" course, designed for beginners. This course is an insightful journey into understanding how fundamental analysis, a cornerstone in financial markets, is crucial in determining the model price of a futures contract. The course meticulously unravels the intricacies of various economic factors and their impact on the futures market, offering a comprehensive understanding for both new and experienced traders.
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Key Course Highlights:

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• Introduction to Fundamental Analysis: Explains how fundamental analysis, commonly used in stock trading, is equally applicable to futures contracts.
• Fundamental vs Technical Analysis: Discusses the different aspects traders consider, from chart trends to commodity demand, in futures trading.
• Supply and Demand in Futures: Examines the critical role of supply and demand in determining futures contract prices.
• Fundamentals in Equity Index Futures: Focuses on unique fundamental factors affecting the price of equity index futures.
• Energy Futures Analysis: Explores the diverse end-uses of energy products and their influence on futures pricing.
• Interest Rate Futures Insights: Offers an overview of various interest rate futures products, from short to long-term maturity.
• Forex and FX Futures Fundamentals: Covers the trading of futures contracts representing currency relationships in the Forex market.
• Agricultural Futures Examination: Analyzes factors influencing the price movement of agricultural commodities like grains and cattle.
• Metals Futures Analysis: Investigates the factors affecting the future prices of metals like gold and silver.
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By the end of the "Futures Fundamental Analysis" course, participants will have gained a solid foundation in understanding the elements that drive futures prices. This course provides the necessary tools to analyze and interpret market data effectively, enabling traders to make more informed decisions in the dynamic world of futures trading. It's an essential educational path for anyone looking to deepen their knowledge and skills in futures market analysis.

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‍FAQ

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1) How is a futures contract’s “fair value” determined?

It starts with today’s market price of the asset. Then you add costs for holding it (like financing or storage) and subtract any income it produces (like dividends or rent) until the contract ends. For stock index futures, the main factors are interest rates and dividends.

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2) What do contango, backwardation, and basis tell me?

These describe the relationship between futures prices and today’s price (spot price).

‍Contango: futures cost more than today’s price, often because of storage or financing costs.

‍Backwardation: futures cost less than today’s price, often because supply is tight right now.

‍Basis: the difference between futures and today’s price, which usually shrinks as the contract gets closer to expiry.

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3) Which fundamentals should I track by asset class?

‍Stock indexes: dividends, interest rates, company earnings, and share buybacks.

‍Energy (oil, gas): stockpiles, OPEC decisions, refinery activity, and weather.

‍Interest rates: central bank policies, inflation, and government bond sales.

‍Currencies: differences in interest rates, trade balances, and imports/exports.

‍Agriculture: crop progress, government reports, weather, and export demand.

‍Metals: mining supply, industrial demand, and investor buying or selling.

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4) How do I manage rolls and what is roll yield?

• In contango, rolling usually costs you money because later contracts are more expensive.

• In backwardation, rolling can make you money because later contracts are cheaper. Most traders roll when trading activity is highest to avoid problems with liquidity.

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5) What are the key risks in fundamentals-based futures trading?

The main risks are: using borrowed money (leverage), sudden changes in costs or supply, surprise data releases, problems near contract expiry (like forced delivery), low trading activity when rolling, position size limits, and differences between the hedge and the real exposure.

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