Futures (Level 2)

What are Futures?

Futures are a contract between a buyer and seller. Futures look into the future to “lock in” a future price to try and predict where something will be in the future…hence the name. Futures are derivatives because their value comes from an underlying security like a stock or commodity. Commodities are a futures contract with a deliverable asset.

For example, let’s say in January we are General Mills and desire to make flour for some of our brands. We first need to buy wheat to make the flour. However, the farmers are not harvesting wheat in January, and we do not know what the price of wheat will be in June when farmers begin to harvest. So we meet with the farmer and make a deal that we will buy his wheat in June at $6.50 a bushel, and he agrees. We have now locked in a future price and can now budget our year based off a fixed price. We will take delivery of the wheat in June after harvest.

Index Futures

If a stock is a blue chip stock or a well-performing stock, it is put into a cash index to help gauge the overall market. A futures index tries to predict where the stocks traded on the index will be trading on some future date. It is possible to trade futures contracts on a number of indices, including the S&P 500, the Dow, and the NASDAQ. For example, the E-Mini S&P Futures Index (ES) is based off the S&P 500 Cash Index and tries to predict where the S&P 500 will be in the future. The index futures are simply a derivative of the cash indexes. Index futures contracts expire quarterly.

Trading Futures

Futures are a leveraged product. You can leverage your money to a greater extent with futures than with stocks or options, but on the flip side trading futures involves greater risk. For example, approximately $5,060 can control 1 contract of the E-Mini S&P Futures Index which is valued at $50 per point ($50 x (index value)). So if the E-mini S&P was trading at 2100 then one contract would have a value of $105,000 which you would need to set aside $5,060 in margin to control. This translates into an approximately 20 times leveraging of your money. The E-mini S&P trades in 1/4 point increments with each one-point move in the index worth $50. The Dow Futures Index is valued at $5 per point and trades in 1-point increments while the NASDAQ Futures Index trades is 1/4 point increments and is valued at $20 per point.

Why Is It So Important to Learn About Futures?

There is no doubt that we now live in a global economy and what happens overseas will drive our markets higher or lower. What many people fail to realize, however, is that after the U.S. stock market closes each day at 4:00 ET the markets never sleep as they continue to be traded around the world next in Asia then to Europe and then back to the U.S. again. DTI refers to this phenomenon as the 24-hour global market.

While most trading schools simply focus on teaching you how to trade based solely upon what is happening during the U.S. market, we believe that such an approach only gives you a small piece of the overall picture in determining whether you should be long, short, or out of a particular market. We take a 24-hour global view of the market and that’s why we place such emphasis on our students understanding futures to track market direction whether you’re a stock, options, or futures trader.

Understanding How to Use Futures as an Indicator for Stocks and Options

The E-Mini S&P Futures Index (ES) is based off the S&P 500 Cash Index and tries to predict where the S&P 500 will be in the future. Because this index trades around the world virtually 24-hours/day, it provides lots of trading opportunities at night after the U.S. stock market closes. The ES and other futures indexes that are traded around the world after the U.S. stock market closes, before it opens, and during the U.S. trading day also provide important clues about where the U.S. cash market is headed. As such, even if you never intend to trade futures per se, we believe that in order to be a long-term successful stock and/or options trader it is crucial to understand futures and the important role they play in influencing the cash markets.

This time gap between the close of the U.S. market and open the next day is what causes our markets in the U.S. to gap up or gap down at the open because our stocks have been traded at the exchanges around the world and have been pushed up or down during overseas markets. The cash indexes here in the U.S. don’t “see” that movement until the cash open in New York. This leaves the need for an indicator that tracks the markets 24-hours/day which futures allow us to do. Because there are futures on the U.S. cash indexes (S&P 500, Dow 30, NASDAQ 100, Russell 2000) that trade virtually 24-hours/day, we can watch these index futures to get a constant feel for market direction. For example, the majority of American stocks move along with the E-mini S&P Index.

What Will You Learn in Our Level 2 Futures Class?

While you can start off by learning about Stocks & Options in our Level 1 “Old School” Class, Level 2 is our introductory futures class. In this class, we will teach you the fundamentals of the E-Mini S&P Futures Index (ES) and also other important futures indexes — the E-mini Dow, E-mini NASDAQ, E-mini Russell, Euro Stoxx, and German DAX.

After learning our proprietary DTI Method which incorporates the 24-hour global market, key numbers of the market (support, resistance, and pivots), and DTI’s indicators, we’ll show you in a live market setting led by a professional trader a total of 7 proprietary DTI index futures trades:

In addition, we’ll teach you about Trade Management, Risk Management, and Stop Management, as well as Trading Psychology.

What Do You Receive with the Level 2 Futures Class?

24-Hour Global TradeRoom

RoadMap™ market analysis software

NEXT CLASS: January 25-26, 2016

How Much Does it Cost?

Click here to visit our store for pricing information. For greater savings, be sure to check out our Platinum Package which combines Level 1 (Stocks & Options), Level 2 (Futures), and Level 3 (Advanced Stocks, Options, and Futures).