futures and options are confusing to me?

M

martyg

Could someone please help me out a little by explaining to me the difference(s) between trading stocks and trading options and futures. With the 25K rule going into effect, it looks like I need to learn about this area of the market. If its a really lengthy answer maybe somebody could point me to a good article online instead.
Thanks
Marty
 
SEC has the rule ragarding the daytrading/25k reg T (margin
and 3 day settlement). This means when you buy shares it
can be settled in 3 days even if you sell it a same day.
It was your broker discretion - no more ! the rule takes the
broker discretion away on accounts under 25k, so monies will
only be freed after 3 days. Buying power is impacted !!!

The futures markets are regulated by NFA. There is no
impact on futures in regards to the minimum 25k for daytrading. Consider the margin for futures - it's 8-10
times leverage and it's daily set by the exchange and
broker if they chose. there is no 3 day settlement as
account are settled same day for cash ! every day.

Options on stocks weere always a cash business as usual and you can trade them. Consider the spreads in most option bid and ask - you better think again.

I hope this makes sense.
 
As you can imagine options and futures are worlds unto themselves and I don't think anyone can do justice to the subject by posting an article.

If you are totally new to them then get a good intro book such as the "Getting Started in ....." series by Wiley they have one for options and one for futures.

Also you can check out http://www.cboe.com and http://www.cbot.com

If I'm not wrong, a recent rule came into effect which prohibits traders off the floor taking positions within a 15 second time window.

Personally, I think you should be totally comfortable with trading stocks before you move on to derivatives. But that couuld just be me :)

Hope that helps

 
if the SEC's intention was to get rid of retail daytraders, that's it, just promote futures and options or even funnier stock futures.

leverage depends on your capital with futures. but indeed, with one point nasdaq equalling $20 [emini] per contract, your account will die very quickly if you are not very prepared.
You should not consider futures lightly. The thing is you can't just jump from momentum play to momentum play. You usually trade one market at a time [maybe 2].
That's very different from most stock trading. It's the point, it is very different.
NYSE and Nasdaq stock trading is very different, but futures trading is another animal altogether.

When you master it, it is great for income though.

neo
 
There are traders who only trade futures and stock mavens
who never touched a futures contract. I don't think the
statement "you must learn to trade stocks before you trade
futures" is true.For some trend follower traders stocks right now would be very bad. Clearly futures due to the leverage are more dangerous than pure reg T trading. Now that many trade 10:1, 5:1 margin and nasdaq it's not all that different. I trade NL funds and I try not to risk more
than 2% and it's difficult even for me. I don't use any margin. If you however trade full time to trade 10k for
e-mini or trade 10k at echo with 5:1 is a coin toss at best.
It's a bad idea either way and I rather make my 10k monthly
and save my money.
 
Originally posted by andrasnm
There are traders who only trade futures and stock mavens
who never touched a futures contract. I don't think the
statement "you must learn to trade stocks before you trade
futures" is true.
More...

I agree.
I meant to say it is very different. It did not come out right. My meaning was more : you need to know how to trade before trading futures because of the leverage [regardless of stocks or futures, you must master what trading means : trends, execution, position sizing, psychology, etc..]. With stocks you have less leverage so you can make more mistakes when learning. But it is very different so success in one does not make sure success with the other [in either way].

also, there is no 'right way' to trade. you either make money consistently or you don't. if you do, you are doing fine whatever you are trading and however you are doing it. It is not a religion, it's a job.

neo
 
in some ways futures can give you more gain and more control. It used to be very bad with fills and "slippage"
the floor brokers just wanted to shit on small orders and
they would fill it very bad. Now globex trading it may
be ok for a couple of contracts, once futures will trade
more and more electronic it will give some traders the
leverage and trends you can only get if you trade much bigger. What I don't get is the notion to sign many confusing documents to join LLC - tie up your money and
pay some software fees etc, when you can just trade e-mini's
Grant you FCM's are also not insured SPIC !!!!!
 
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