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Opportunity and Risk - NFA Publication

A 49-page report put out by the National Futures Association as an education guide to trading futures and options on futures. We provide this commodities trading article in PDF form.

This publication is a long and very solid introduction to commodities trading of gold, oil, grains, financials, indices, etc. There is hardly a better organization to learn futures trading from than the self-regulatory body of the entire commodities futures market, and they do a great job of presenting the material in a way that is easy to follow. It starts out with a simple introduction to the commodities trading market, similar to what we provided in Futures Trading 101, but goes much further in explaining some of the arithmetic and specific processes behind futures trading. We strongly recommend you take the time to read through this entire commodities trading report, as it will set you up with a solid foundational knowledge of futures trading. Here is the table of contents so you have an idea of what commodities trading topics they cover:

  • Introduction
  • How the Markets are Regulated
    • Conducting Business with a Registered Firm
  • Introduction to Futures Trading
    • Futures Contracts
    • How Prices are Quoted
    • The Market Participants
      • Hedgers
      • Speculators
    • The Process of Price Discovery
      • Minimum Price Changes
      • Daily Price Limits
      • Position Limits
    • Daily Close
    • The Arithmetic of Futures Trading
      • Leverage
      • Margins
    • Basic Trading Strategies
      • Buying (Going Long) to Profit from an Expected Price Increase
      • Selling (Going Short) to Profit from an Expected Price Decrease
      • Spreads
      • Stop Orders
  • How to Participate in Futures Trading
    • Trade Your Own Account
    • Have Someone Manage Your Account
    • Use a Commodity Trading Advisor
    • Participate in a Commodity Pool
    • Establishing an Account
  • Introduction to Options on Futures
    • The Arithmetic of Option Premiums
      • Intrinsic Value
      • Time Value
    • Understanding Options Transaction Fees
      • Leverage
      • Calculating the Break-Even Price
      • Factors Affecting the Choice of an Option
    • After You Buy an Option
      • Offset the Option
      • Continue to Hold the Option
      • Exercise the Option
    • Who Writes Options and Why
  • If a Dispute Should Arise
  • Glossary of Terms
  • Additional Resources

National Futures Association: Opportunity and Risk

This link will open the commodities trading report as a PDF: National Futures Association: Opportunity and Risk

Trading commodity futures and options involves substantial risk of loss. The recommendations contained are of opinion only and do not guarantee any profits. These are risky markets and only risk capital should be used. Past performances are not necessarily indicative of future results. This is not a solicitation of any order to buy or sell, but a current futures market view. Any statement of facts herein contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgment in trading!