General Futures Questions

Q. What are derivatives?
A. Derivatives refer to financial products like futures or options that are derived from an underlying asset, such as stocks, currencies or interest rates. The value of the derivative is determined by fluctuations in the underlying asset.

Q. What is a futures contract?
A. A futures contract is a contractual agreement to buy or sell a particular commodity or financial instrument at a pre-determined price in the future. The contract details quality and quantity of the underlying asset.

Q. What is initial margin?
A. An initial margin is the required amount of money that must be deposited in your futures trading account before you buy or sell a contract. If profits are accrued on an open position, they are added to the balance in the margin account, just as losses are deducted.

Q. What is maintenance margin?
A. A maintenance margin is the minimum amount that must be maintained in your margin account after posting initial margin on the first day to maintain your open futures position. If funds fall below the maintenance margin requirement, you are required to deposit funds to bring the balance back to the initial margin amount.

Q. How do I read the contract month symbols?
A. Futures contracts use a unique monthly letter code. The monthly codes are as follows:

F=January G=February H=March J=April

K=May M=June N=July Q=August

U=September V=October X=November Z=December

Q. How do I read a futures ticker symbol?
A. A futures ticker symbol is determined by the root symbol for the underlying contract followed by the month and year. For example, a 2007 September E-mini S&P Contract ticker is: ESU7. You can view the root symbol of the futures markets offered by GFT Futures at http://www.gftfutures.com/pricing/pricing.asp.

Q. How do I determine the value of a futures contract?
A. The value of a futures contract is found by first determining the contract specifications and a current quote on the future.
For example, the December 2007 E-mini S&P Index is determined by the following:

ESZ7 = 1529.00
ES = $50.0 * S&P Index
Notional Value = Current quote of future * Contract Size * Number of Contracts
$76,450.00 = 1529.00 * $50.00 * 1
Notional Value of one December 2007 S&P E-mini futures contract is $76,450.00.

Q. If I enter a futures order with the duration “day,” when is my order cancelled?
A. Futures orders that are entered with the duration of “day” are good until the close of the current session. You can view market open and close times by visiting http://www.gftfutures.com/pricing/pricing.asp and clicking the more information icon to the right of your selected futures market.

Q. How are futures prices quoted?
A. Futures prices are established through competitive bidding and are immediately and continuously relayed around the globe via wire and satellite. Prices are usually quoted in dollars and cents, fraction of a cent, per bushel, pound or ounce; in dollars and cents for foreign currencies; and in points and percentages of a point for financial instruments.

Q. How much money does it take to get started in futures trading?
A. You can open an account with GFT Futures with a $2,500 minimum deposit.

Q. What is open interest?
A. Open interest is the total number of outstanding futures contracts that are not delivered on a given day.

Q. How are futures orders placed and filled?
A. All contracts traded at exchange must be done so by a member of the exchange. A broker such as GFT Futures must be contacted via an electronic platform or phone to place the order, in order to buy or sell a contract. The broker will then submit the order to the trading system. After the trade is entered into the live market, the trader with the best price becomes the counterparty to the deal. The broker will inform the customer that the order is filled and both sides of the trade will pass the trade details onto the clearinghouse, which acts as the central counterparty.

Q. What are the benefits of trading futures?
A. In futures trading, investors may benefit from rising, falling or static markets. Additionally, futures trading has gained popularity because of its simplicity, ease of entry and exit, margin requirements and nearly 24-hour trading. Because futures are capital investment tools, they can offer private investors greater exposure to the market than traditional investments. Visit http://www.gftfutures.com/futures for more information.