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            Basics of Futures Trading

A commodity futures contract is an agreement to buy or sell a particular commodity at a future date
	The price and the amount of the commodity are fixed at the time of the agreement
	Most contracts contemplate that the agreement will be fulfilled by actual delivery of the commodity
	Some contracts allow cash settlement in lieu of delivery
	Most contracts are liquidated before the delivery date
	A commodity futures option gives the purchaser the right to buy or sell a particular futures contract at a future date for a particular price
	With limited exceptions, commodity futures and options must be traded through an exchange by persons and firms who are registered with the CFTCTypical Users of the Futures Markets

Most participants in the futures markets are commercial or institutional commodities producers or consumers
	Most participants are “hedgers” who trade futures to maximize the value of their assets, and to reduce the risk of financial losses from price changes
	Other participants are “speculators” who attempt to profit from price changes in futures contractsRegulation of Futures Professionals

Companies and individuals who handle customer funds or give trading advice must register with the National Futures Association (NFA), a self-regulatory organization approved by the CFTC
	The CFTC seeks to protect customers by requiring:
	market risks and past performance to be disclosed to prospective customers;
	customer funds to be kept in accounts separate from the firm’s own funds; and
	customer accounts to be adjusted to reflect each trading day’s current market value at close
	The CFTC also monitors registrant supervision systems, internal controls and sales practice compliance programs
	The NFA provides detailed information for traders. Please visit the site for more informationBefore You Purchase Commodity Futures or Options Contracts

Consider your financial experience, goals and financial resources
	Know how much you can afford to lose above and beyond your initial investment
	Understand all of the obligations for any contract that you purchase
	Thoroughly review the risk disclosure documents that are required to be provided by the broker
	Know whom to contact with a problem or question
	Ask questions and gather information before opening a trading accountIf you have questions, are aware of suspicious activities, or believe you have been defrauded, please contact the CFTC immediately. Call the CFTC’s Consumer Protection Hotline at 866.366.2382 or file a tip or complaint.

Approach the Futures Markets with Caution

Speculating in commodity futures and options is a volatile, complex and risky venture that is rarely suitable for individual investors or “retail customers”
	Many individuals lose all of their money, and can be required to pay more than they invested initially
	Learn about fraudulent activities in the futures markets Learn & Protect
  

        
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 RELATED LINKS
    

      Customer Advisory: Understand Risks and Markets before Reacting to Internet Hype
          Customer Advisory: Learn About Risks Before Investing in Commodity ETPs or Funds
          Article: Economic Purpose of Futures Markets and How They Work


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