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Many people have heard about the Futures Market and how they can earn a substantial income by trading these markets. But many of them dont have a clear idea of what futures are and how they can make money with them.
In short: a futures contract is a standard contract that is traded on a futures exchange. This means that the entity owning the contract can buy or sell a certain underlying instrument (a commodity most of the time) at a certain date in the future, at a pre-set price. The future date is called the delivery date of the contract or the final settlement date. The pre-set price of the commodity is called the futures price of the commodity. The price of the commodity on the delivery date is called the settlement price. Normally the settlement price converges towards the futures price on the given delivery date.
A very important characteristic of a futures contract is the one that gives the holder the right and the obligation to buy or sell, which is different to the characteristics of an options contract, which gives the buyer the right, but not the obligation, and the option writer (seller) the obligation, but not the right. In other words, the owner of an options contract may buy or sell his contract on or prior to the pre-determined settlement/expiration date. In contrast both parties of a “futures contract” must exercise the contract (buy or sell) on the settlement date. In the case of the holder of a futures position, if he wants to exit the commitment, he has to sell his long position or buy back his short position, effectively closing out the futures position and its contract obligations.
As in every trading activity you will need the best trading strategy in order to earn a good income with futures trading. Recently the author behind the 60 Minute Trader strategy has released his results and he can prove winnings of at least 75 per every 100 trades entered in the futures market. This means he can teach any one how to make a good extra income.