Your Questions About Paper Trading Futures

Laura asks…

What shall I ask the South African Ambassador?

This coming week I have an interview arranged with the South African ambassador, aiming to get his view on my thesis (economic).

Besides the questions relating to my paper, what are thought-provoking questions for an ambassador?

Nothing vanilla, please.
Something global, with large-scale economic impact.

John answers:

Well I would ask what he thinks about the Diamond trade and is there still a future in it.

Ruth asks…

What should I do after 2005 college graduation B.S and soon after convicted of possession 6yrs w/o any priors?

I graduated with my B.S in Manufacturing Dec. 2005 got mixed with wrong people and got convicted to mandatory 6yrs w/o any priors. I had two seemingly credible attorneys; whom I believe sold/traded me out. I was curious if I should reopen the case?

John answers:

If it was your first offense after 5 years you can file for an expunging of your record..You do not need to waste money on a attorney
You can download the expunging paper right off your courthouse website .it may cost 20.00 to submit it but it is better then the 400.00
most lawyers will charge you to do the same thing.
After it is processed the judge will take it off your record and then you can tell future employers that you do not have a record…it will be removed from the system. Call your local court house for more info about
Expunging your record. Good luck!

Robert asks…

What is the relationship between spot price of commodities, COMEX price, and the “real” price?

Hi. I would like to know how the prices of commodities that we see in the financial news get set and what they really represent. The reason I ask is that there are a lot of bloggers who say that the prices of gold and silver (for example) are manipulated through shorting of futures contracts on the COMEX, but that’s just a paper market, so that price is not “real.”

But is the COMEX the place where the spot price is determined? I thought the COMEX is just a futures market, not a spot market. Doesn’t “spot” mean a cash price–the price someone is willing to pay for the physical stuff right on the spot, cash on the barrelhead? Is there a market or exchange where that type of transaction is done? And is that the place where the spot price is determined?

Or is the “spot” price we see in the news set on the COMEX or other futures market? In that case, is it possible for the “spot” price to reflect trades in paper contracts, which could be traded in such a way that the price of those contracts does not reflect what the “real” price should be? In that case, is it possible for the “paper” price to be kept out of synch with the “real” price for any significant length of time? If that were so, how would we know what the “real” price is? And if the “real” price based on actual demand for the actual stuff were way out of synch with the “paper” price, wouldn’t that demand somehow affect the “paper” market and force the “paper” price to be more in synch with the “real” price? If so, how would that happen?

This is all very confusing to me, so I hope someone out there can answer my question. Thanks

John answers:

You need to look up “Cash and carry” arbitrage.

The spot price of gold and silver is the price in which large amounts of the metals are traded at London metals dealers. I don’t know too much about that but you can buy and store metal in vaults in London and they are happy to move it from one client to another and keep it in their vaults. The metal you get is certified “Good for Delivery” metal.

On to futures…When you buy a futures contract for gold or silver, there is a relationship between the price of the futures contract and the spot price. If I want 100oz gold in 60 days, I can:
a) Buy a 60-day futures contract and deposit the futures price*100oz discounted by risk free rate in risk free deposits.
B) Buy spot gold and pay to store it for 60 days while receiving the lease rate on the gold for 60 days (If positive).
If they are equal in 60 days, the must be equal now. If one of those is higher than the other than there is a cash and carry or reverse cash and carry arbitrage. So if a) is higher than b) then I short the futures contract, buy spot gold with my cash, lease it out, and deliver it under the contract in 60 days and pocket the difference (cash and carry).

This linkage is what drives people to say I can manipulate the spot price using futures. If I short a ton of futures contracts, the futures price drops. The arbitrage then causes the spot price to drop.

The problem with all of this is that it is pathetic conspiracy theory garbage. I’ve worked at a bunch of those places and everyone there would laugh at it. Manipulating the price of commodities is an excellent way to get in trouble with the CFTC and go to jail. It is not an easy way to make money. How many people would risk their $250K plus salaries for, uh, what exactly? (Nobody). It;s just dumb.

Charles asks…

Does anyone on here trade currencies on the Foreign Exchange?

I am interested in trying this. Can you recommend a good training program and/or software? Do you need a lot of money up front to begin?

John answers:

There are many-many advantages over the various other ways of investing. First of all it is a 24 hr market, except for weekends of course. You have the US market then the European and then the Asian. One of the great times to trade is during the over lapping periods. The USA and European overlap between 5am & 9am eastern and the Euro & Asian between 11pm to 1am eastern. It’s usually the busiest time and best to trade.

There is also the risk factor for the accounts. With futures and options you can get margin calls that can wipe you out. If you get caught in a bad trade not only do you lose the money in the account but you may have to come up with a lot more from your pocket. It can be very risking, but not in Forex. Worst case scenario you could lose what’s in you account. But you would have to do something really stupid. Like making a big trade on a Fundamental day and leave it alone. If market takes a bad move and you weren’t there. OOOPS. But that wouldn’t happen with a smart trader.

Then there are the demo accounts which are an account where you can trade using all the right things, platform, charts, and information. But you are using play money, or what we call paper trading too. Plus with Forex you have a mini account. Instead of needing thousands of dollars to get into it, you can open an account with as little as $300.00. Now of course you will be trading at 1 tenth of a trade. IN other words you controlling 10,000 instead of 100,000.00 these are call lots. Which also means you will only risk 1 tenth too!

So if you would love to learn to do investing and not have near the risk you really need to take a closer look at Forex trading.

Investing in foreign currencies is a relatively new avenue of investing. There are considerably fewer people are aware of this market than there are people aware of several other avenues of investing. Trading foreign currency, also known as Forex, is the most lucrative investment market that exists. There are several factors that make this true among which, successful Forex traders earn realistic profits of one hundred plus percent each month. Compared to some of the better known investment markets such as corporate stocks, this is an unheard of return on investment. It’s very necessary to mention here that a person who invests in Forex must, without exception, make it a point to learn the detailed, but simple strategies and information surrounding the market. This very fact is what makes the difference between successful Forex traders and other traders.


Lizzie asks…

How to becom Future and options trader?

how to become trader in future and options.

John answers:

Read a lot, and paper-trade for a long time, learning and testing various theories and strategies. Learn very strict money management and risk management techniques. When you’re really ready, open an options account, and open a futures account, deposit money, and trade.

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