James asked in Business & FinanceInvesting · 1 decade ago

What are Futures and where can I find its Chart?

I would like to know the difference between regular stocks and futures?

I would also like to find a free up to the minute chart of the nasdaq 100 future for reference?

Who are futures for and what are some facts and or tips about them?

Thank you for the help!

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  • Anonymous
    1 decade ago
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    You are obviously familiar with the Nasdaq Index, and the S&P 500 index and the DJIA index.

    Here's a chart of the DJIA index

    http://quotes.ino.com/chart/?s=INDEX_DJI

    For a futures chart, you have to go where they quote commodities. Yahoo isn't big on futures, so here is

    the Dow mini futures chart

    http://quotes.ino.com/chart/?s=CBOT_YM.M10.E

    Some of the major indices and their charts are here, including gold and oil

    http://quotes.ino.com/indexes.html

    You can't trade an index. So the index futures contract was developed to facilitate trade of an index. They trade exactly like any other commodity, and similar to a stock, except they expire quarterly. You're just betting on the change in price. Not to worry. most people don't hold them for more than a few minutes anyway, because they are highly leveraged contracts, like any futures contract.

    What Does Futures Mean?

    A financial contract obligating the buyer to purchase an asset (or the seller to sell an asset), such as a physical commodity or a financial instrument, at a predetermined future date and price. Futures contracts detail the quality and quantity of the underlying asset; they are standardized to facilitate trading on a futures exchange. Some futures contracts may call for physical delivery of the asset, while others are settled in cash. The futures markets are characterized by the ability to use very high leverage relative to stock markets.

    Futures can be used either to hedge or to speculate on the price movement of the underlying asset. For example, a producer of corn could use futures to lock in a certain price and reduce risk (hedge). On the other hand, anybody could speculate on the price movement of corn by going long or short using futures.

    Investopedia explains Futures

    The primary difference between options and futures is that options give the holder the right to buy or sell the underlying asset at expiration, while the holder of a futures contract is obligated to fulfill the terms of his/her contract.

    In real life, the actual delivery rate of the underlying goods specified in futures contracts is very low. This is a result of the fact that the hedging or speculating benefits of the contracts can be had largely without actually holding the contract until expiry and delivering the good(s). For example, if you were long in a futures contract, you could go short in the same type of contract to offset your position. This serves to exit your position, much like selling a stock in the equity markets would close a trade.

    Okay, we've defined a futures contract, now let's look at an Index Futures contract

    What Does Index Futures Mean?

    A futures contract on a stock or financial index. For each index there may be a different multiple for determining the price of the futures contract.

    Investopedia explains Index Futures

    For example, the S&P 500 Index is one of the most widely traded index futures contracts in the U.S. Stock portfolio managers who want to hedge risk over a certain period of time often use S&P 500 futures to do so. By shorting these contracts, stock portfolio managers can protect themselves from the downside price risk of the broader market. However, by using this hedging strategy, if perfectly done, the manager's portfolio will not participate in any gains on the index; instead, the portfolio will lock in gains equivalent to the risk-free rate of interest.

    Alternatively, stock portfolio managers can use index futures to increase their exposure to movements in a particular index, essentially leveraging their portfolios.

    And the last part of your question.

    What Does Stock Mean?

    A type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings.

    There are two main types of stock: common and preferred. Common stock usually entitles the owner to vote at shareholders' meetings and to receive dividends. Preferred stock generally does not have voting rights, but has a higher claim on assets and earnings than the common shares. For example, owners of preferred stock receive dividends before common shareholders and have priority in the event that a company goes bankrupt and is liquidated.

    Also known as "shares" or "equity".

    Investopedia explains Stock

    A holder of stock (a shareholder) has a claim to a part of the corporation's assets and earnings. In other words, a shareholder is an owner of a company. Ownership is determined by the number of shares a person owns relative to the number of outstanding shares. For example, if a company has 1,000 shares of stock outstanding and one person owns 100 shares, that person would own and have claim to 10% of the company's assets.

    Stocks are the foundation of nearly every portfolio. Historically, they have outperformed most other investments over the long run.

    A good reference for financial terms and definitions go here:

    http://www.investopedia.com/terms/f/futures.asp

    http://www.investopedia.com/terms/i/indexfutures.a...

  • 1 decade ago

    Hit up the Wall Street Journal (www.wsj.com). They have the most up-to-date information available on all the markets outside of the Bloomberg (and you don't have to pay for it).

    The quick down and dirty- stocks are a warrant for some share of ownership of a company. The price of a stock rises and falls depending on the market's sentiments on the company, the overall economy, the industry in which the company operates, etc. When investors buy stock, they are expecting/hoping for the value of the company to rise, increasing the value of the stock.

    Futures are contracts written to trade commodities (everything from grain to oil to currency, although some companies have stock futures as well) based on a agreed-upon price at some agreed-upon point in the future. Futures serve as a good means for companies requiring raw materials for their production to set prices for themselves down the road (for example, Southwest Airlines faired well compared to other airlines in the US during the Bush Administration becasue it had purchased futures in oil BEFORE the market saw the huge spikes in the cost of barrel of crude). Futures are confusing, but very interesting if you like this sort of stuff. There's a good amount of information on the web, from the Federal Reserve to the NYTimes to Wikipedia, to increase your knowledge of how these things work.

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