I have a question, is there a master trader can answer this? - futures io
futures io



I have a question, is there a master trader can answer this?


Discussion in Traders Hideout

Updated
      Top Posters
    1. looks_one bobwest with 1 posts (6 thanks)
    2. looks_two Schnook with 1 posts (8 thanks)
    3. looks_3 SMCJB with 1 posts (5 thanks)
    4. looks_4 HiddenPhilosopher with 1 posts (1 thanks)
      Best Posters
    1. looks_one Schnook with 8 thanks per post
    2. looks_two bobwest with 6 thanks per post
    3. looks_3 SMCJB with 5 thanks per post
    4. looks_4 HiddenPhilosopher with 1 thanks per post
    1. trending_up 1,222 views
    2. thumb_up 20 thanks given
    3. group 4 followers
    1. forum 3 posts
    2. attach_file 0 attachments




Welcome to futures io: the largest futures trading community on the planet, with well over 125,000 members
  • Genuine reviews from real traders, not fake reviews from stealth vendors
  • Quality education from leading professional traders
  • We are a friendly, helpful, and positive community
  • We do not tolerate rude behavior, trolling, or vendors advertising in posts
  • We are here to help, just let us know what you need
You'll need to register in order to view the content of the threads and start contributing to our community.  It's free and simple.

-- Big Mike, Site Administrator

(If you already have an account, login at the top of the page)

 
Search this Thread
 

I have a question, is there a master trader can answer this?

(login for full post details)
  #1 (permalink)
HiddenPhilosopher
New York, NY
 
 
Posts: 2 since Oct 2020
Thanks: 4 given, 1 received

I have been thinking about one thing and haven't figured it out yet.

In the futures market, are quantities of contracts always constant?

When you buy a contract, someone sells it to you. Likewise, when you short something, someone buys it.

Then where did these contracts initially come from? Can total number of contracts increase/decrease?

I guess it's very different from how stock market works.

Does anyone know how exactly market works?

Reply With Quote
The following user says Thank You to HiddenPhilosopher for this post:

Journal Challenge April 2021 results (now extended!):
Competing for $1800 in prizes from Jigsaw
looks_oneMaking a Living with the Microsby sstheo
(387 thanks from 41 posts)
looks_twoSalao's Journalby Salao
(88 thanks from 15 posts)
looks_3Learning to Profit - A journey in algorithms and optionsby Syntax
(59 thanks from 19 posts)
looks_4Deetee’s DAX Trading Journal (time based)by Deetee
(51 thanks from 23 posts)
looks_5Maybe a little bit different journalby Malykubo
(37 thanks from 23 posts)
 
Best Threads (Most Thanked)
in the last 7 days on futures io
The Crude Dude Oil Trading System
107 thanks
Seasonal Trades
31 thanks
futures io site changelog and issues/problem reporting
27 thanks
Spoo-nalysis ES e-mini futures S&P 500
22 thanks
Cryptocurrencies 101 -- what Ive learned so far
19 thanks
 
(login for full post details)
  #2 (permalink)
 Schnook 
Munich, Germany
 
Experience: Advanced
Platform: Sierra Chart
Broker: Interactive Brokers
Trading: liquid products
 
Schnook's Avatar
 
Posts: 462 since Jul 2016
Thanks: 884 given, 1,557 received


HiddenPhilosopher View Post
When you buy a contract, someone sells it to you. Likewise, when you short something, someone buys it.

Then where did these contracts initially come from?

The contract is, effectively, an agreement between buyer and seller. That agreement comes from the parties to that agreement, who execute and settle their contracts through a centralized exchange acting as counterparty.


HiddenPhilosopher View Post
Can total number of contracts increase/decrease?

Yes. See "open interest"

I highly recommend the primers and other educational materials on the CME website for these types of questions.

See here: --> https://www.cmegroup.com/education/courses/introduction-to-futures/open-interest.html

Reply With Quote
The following 8 users say Thank You to Schnook for this post:
 
(login for full post details)
  #3 (permalink)
 bobwest 
Site Moderator
Sarasota FL
 
Experience: Advanced
Platform: Sierra Chart
Trading: ES, YM
 
bobwest's Avatar
 
Posts: 6,460 since Jan 2013
Thanks: 48,957 given, 21,605 received



HiddenPhilosopher View Post
I have been thinking about one thing and haven't figured it out yet.

In the futures market, are quantities of contracts always constant?

When you buy a contract, someone sells it to you. Likewise, when you short something, someone buys it.

Then where did these contracts initially come from? Can total number of contracts increase/decrease?

I guess it's very different from how stock market works.

Does anyone know how exactly market works?


Schnook View Post
The contract is, effectively, an agreement between buyer and seller. That agreement comes from the parties to that agreement, who execute and settle their contracts through a centralized exchange acting as counterparty.


Yes. See "open interest"

I highly recommend the primers and other educational materials on the CME website for these types of questions.

See here: --> https://www.cmegroup.com/education/courses/introduction-to-futures/open-interest.html

This is a good question, and often comes up. @Schnook explained it very well.

For a somewhat longer-winded explanation, I took a shot at it in this link:



The thing to understand is that futures contracts are not assets that, like stocks, already exist and that exchange hands when they are bought and sold. They are contracts, which exist because the parties enter into them. They have a relation to actual assets -- the underlying commodities or indices or currencies or whatever that they are agreements to buy or sell -- but, as contracts, they don't exist until someone enters into them.

This is why they are called "derivatives," which is also the case with option contracts, by the way: they exist because someone agreed to do something in the future.

Bob.

When one door closes, another opens.
-- Cervantes, Don Quixote
Visit my futures io Trade Journal Reply With Quote
The following 6 users say Thank You to bobwest for this post:
 
(login for full post details)
  #4 (permalink)
 SMCJB 
Legendary Market Wizard
Houston, TX
 
Experience: Advanced
Platform: Trading Technologies
Broker: Primary Advantage Futures. Also ED&F and Tradestation
Trading: Primarily Energy but also a little GE, GC, SI & Bitcoin
 
Posts: 4,066 since Dec 2013
Thanks: 3,371 given, 8,036 received

Maybe obvious, but as an additional information point.

If A buys from B we have 1 open contract and then if C then buys from D we now have 2 open contracts.

but ...

If A buys from B we have 1 contract and then if B buys from C, we actually now only have 1 open contract, where A has bought from C, even though they never transacted with each ever.

Reply With Quote
The following 5 users say Thank You to SMCJB for this post:


futures io Trading Community Traders Hideout > I have a question, is there a master trader can answer this?


Last Updated on October 11, 2020


Upcoming Webinars and Events
 

NinjaTrader Indicator Challenge!

Ongoing
 

Journal Challenge w/$1,800 in prizes!

April

An Introduction to CME Group Micro Bitcoin Futures w/David Lerman

Elite only
     



Copyright © 2021 by futures io, s.a., Av Ricardo J. Alfaro, Century Tower, Panama, Ph: +507 833-9432 (Panama and Intl), +1 888-312-3001 (USA and Canada), info@futures.io
All information is for educational use only and is not investment advice.
There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
no new posts