5 Ways to Use Futures to Your Advantage

by Andrew McGuinness     jul. 16, 2019

Futures are something you may not be aware of unless you already have plenty of experience with the market as a trader or investor. Many professional investors choose futures over other assets like equities and foreign exchange stocks. Others choose not to involve themselves with futures whatsoever because they are unsure of how to use them. For those of you who are unclear about how exactly to use futures to your advantage, here are the five best ways to do so.

1. Comparatively low commission

With some investments you might find that despite the reasonable, stable returns you are able to receive, the commissions you take on as an investor aren’t worth it. Emini S&P 500 (ES) futures, however, only require a small commission of $1.99 for each side you invest in.

For those wanting to make larger, more expansive investments, there is also a membership available for lease in which you would pay only a minimal commission for each investment. The low commission is actually only considerably noticeable if you are this type of expansive trader, because the larger the amount of trades you execute, the more you will save on commissions.

Foreign exchange trades do not have an official commission, there is no particular amount that is charged to all trades within this market. However, it is common that $5-10 dollars will be taken from the stock brokerage firm in order to cover their commission fees for each trade. This may not seem like much, but when compared to ES futures, the difference is substantial. Especially once we put these figures into context: $1.99 per side or even less when membership benefits are pursued versus an average of $5-10 per side. These funds add up.

2. Nearly 24-hour availability

The futures market is available at almost all hours of the day. To be exact, it opens 5pm on Sunday, closes 3.15pm on Friday, and is unavailable for half an hour from 4.30-5pm on a daily basis in order to allow for maintenance checks. This means that it provides its holders not only with more possibilities to make profit due to its extended availability, but investors are also provided with an amount of convenience not found in most markets. The stock market, for example, is open less than 12 hours each day. And even during these 12 hours, liquidity isn’t guaranteed to be available.

While the futures market is open, you are able to enter, leave, and secure your position by having orders currently working for you. For this reason, if you decide to invest in futures, the time frame wherein the futures market is up and running would definitely be something you could take advantage of.

3. Completely electronic

If you are tired of all of the middlemen usually involved with trading, and would be more comfortable with investing in the comfort of your own home, futures are the right investment choice for you. By investing in futures, you will be able to complete all transactions electronically.

A majority of forex trades are fulfilled electronically as well, but not through all stages of the trade transaction. Order approval, for example, must be done manually. The other benefit of completely electronic investments is the fact that transactions are completed on a first come, first serve basis. No unfair advantages, no requirements of higher status in order to go about your business. The only rule that futures hold in place in terms of completing transactions is the early bird gets the worm.

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