GENERAL OVERVIEW OF MANAGED FUTURES


What Is a Futures Contract?

Any overview of managed futures must begin with a description of futures contracts. A futures contract is a legally binding agreement designed to allow buyers and sellers to lock In a price on a well specified good (e.g., physical commodity, fixed-income security, equity index, or currency) on a specific, forthcoming settlement date. They are standardized according to quality, quantity, delivery time and location for each contract. The only variable is price.

How Did Futures Trading Begin?

Today's futures markets, and the principles that underlie commodity futures trading, evolved from practices that are centuries old, dating back to the ancient Greek and Roman markets. Commodity markets in the United States existed as early as 1752.

The history of modern futures trading began on the Midwestern frontier in the early 1800s. It was tied closely to the development of commerce in Chicago and the grain trade in the Midwest. As grain trade expanded, a centralized marketplace, the Chicago Board of Trade (CBOT) was formed In 1848 by 82 merchants.  Soon after trading began in grains, cattle, eggs and other commodities.

When Did Trading In Financial Futures Start?

Beginning In the 1970s, the first financial futures contracts were launched with Government National Mortgage Association (GNMA) mortgage-backed certificates and foreign currency futures. Others quickly followed. As a result, annual futures trading volume on U.S. exchanges from 1968 to 1998 Increased more than 10,500 percent.

Today, everything from the S&P 500 Stock Index to crude oil to pork bellies are traded on federally regulated futures exchanges like the CBOT and the New York Mercantile Exchange (NYMEX).

Why Should I Invest In Managed Futures?

Because a well diversified portfolio which includes Managed Futures has demonstrated the potential to yield better risk adjusted returns over the long run.

The risk of trading futures, options and foreign exchange can be substantial. Past performance is not necessarily indicative of future results. The factual information of this report has been obtained from sources believed to be reliable, but is not necessarily all inclusive and its accuracy can not be guaranteed.

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